It is well known that young people are hit pretty hard when it comes to car insurance. Insurance companies are in the risk management business, and the statistics repeatedly show that drivers age 16-25 are far more likely to get in an accident than older drivers.

For this reason, drivers in their teens and 20s will, on average, pay higher insurance premiums. But there are many steps that can be taken to drive that premium down.

Whose Plan?

Before we begin looking at the money saving tips, we should first address the question of if young drivers should be added to their family’s plan or start their own plan.

The short answer is that the cheapest route is typically to add teen or college-age drivers to their parents’ existing plan. However, some parents may not feel comfortable ultimately being the one “on the hook” for any damages that could be caused by their son or daughter’s negligent driving choices. Ultimately, each family has to make this decision for themselves.

For this reason, we’ve broken up this guide into two sections:

• If you are a parent who will be adding your son or daughter to your plan, then the top section is for you.
• If you are a young driver who will be purchasing your own plan, then I would recommend reading the entire guide, as both sections will include helpful information that could save you money.

For Parents Adding Young Drivers to Their Plan

1. Compare Quotes.

This is so important! In general, consumers could save a lot of money by shopping around their car insurance more often, but this is especially true when adding a young driver to your policy. Some insurance agencies charge far more than others for young drivers.

Don’t just blindly add your child to your existing policy. Go online to an insurance comparison site or pick up the phone and give a few agencies a call. It could literally save you hundreds of dollars.

2. Assign Them to the Cheapest Car.

If your teen or college student owns their own car, then this point does not apply, as they will be automatically assigned to that particular car. However, for young drivers who don’t have their own wheels, you need to make sure that your insurance company has assigned them to whatever is the least expensive car on your policy.

Many agencies like to do exactly the opposite – assigning the young driver to the most expensive car on the policy, causing your policy to skyrocket even higher than it should. Don’t let this happen.

3. Utilize Student Discounts.

Most insurance companies offer certain discounts specifically designed for students.  The one most commonly offered is the “Good Student Discount,” which rewards students for getting good grades in school.

Another, lesser-known discount, often called “Student Away,” is designed to lower premiums for parents who have a child that is attending college out-of-state and does not have access to his or her car during the school semester.

You need to know which student discounts are available with your insurance agency and take advantage of the ones that you can.

4. Enroll Them in Safe Driver Courses

Many insurance companies will slash a percentage off of your premium if your young driver completes a “safe driver” or “defensive driver” course. Check with your insurance agency to see if they offer such a discount and, if so, which classes qualify.

5. Track Their Driving

Most of the big insurance companies now offer tracking devices similar to the ones that Progressive uses with their well-known “Snapshot” program. They advertise the devices as being able to save you money because your insurance company will know if you are a safe driver, and will reward you accordingly with a discount.

I made this the last option for a reason. Many consumers don’t think that the devices are worth it. In all honesty, unless you have a child who is an unusually safe driver, this is probably not going to save you a lot of money.

However, I included it on the list for two reasons:

1. Knowing that they’re being “tracked,” may subconsciously encourage your son or daughter to drive safer.

2. You, as the parent, may be able to see the monthly results as well, helping you to make sure that your teen or college student is developing safe driving habits.

For Young Drivers Getting Their Own Plan

All of the money-saving tips above apply to you as well. Additionally, you should take the following steps if you want to get the best deal on your car insurance.

1. Pick the Right Car

As we covered, in our “First-Time Car Buyer Guide” the type of car being insured makes a huge impact on your policy’s cost.  Buying used instead of new typically will save you on your insurance. You also want to stay away from sports cars and SUV’s.

Sedans and trucks are typically the least expensive to insure. But if you want to know which cars on the market today are the absolute cheapest to insure, check out this list from The Balance.

2. Build Your Credit

Whether its fair or not, insurance companies use credit scores as another means of evaluating the chances that a driver will get in an auto accident. And they give the best rates to customers with high credit scores.

In fact, Consumer Reports has found that your credit score may have more of an effect on your premium cost than any other factor, including driving history! And while it may seem wrong and outrageous, the insurance companies have studies that they are basing all this craziness on, and the practice is not going away anytime soon.

If your credit score has risen recently, get a new car insurance quote. It could save you a lot of cash!

3. Get New Quotes After Key Life Events

As you get older (and hopefully keep a clean driving record) your insurance risk goes down. That’s why we recommend that you shop your insurance rate once each year after your birthday.

Call two or three of the best auto insurance companies and see if you can get a better deal for the same (or better) insurance coverage. You may be shocked at how much you can save by switching!

In addition to birthdays, here are some other life events that can often cause your insurance rate to go down:

Getting Married – Why? Statistics show that married people get in fewer crashes.

Buying a House – Why? Insurance companies consider homeowners slightly more likely to pay their bills each month than renters.

Moving – Why? City populations and state laws and claim frequencies all contribute to your rate. Believe it or not, your zip code can be nearly as important as your driving record in determining your insurance rate.

4. When Transitioning From a Parent’s Plan To Your Own, Don’t Allow Coverage to “Gap”

If you have been on your parent’s plan for a while, but are making the move to your own plan, you need to make sure that you have your own insurance in place BEFORE your parents take you off of their plan.

When you do the opposite, the “gap” in coverage could cost you a lot of money, as you will be quoted as an uninsured motorist. This simple mistake has burned many young drivers who simply didn’t know any better.