Why you should be talking to your 13-year-old about cars and insurance

Fun with friends can be memorable, but young drivers need to take care. CONTRIBUTED
Fun with friends can be memorable, but young drivers need to take care. CONTRIBUTED

A driver’s license doesn’t come until age 16, but families would be wise to begin talking about driving, cars and insuring cars a full three years ahead of that day.

Handled well, this topic can also help a family tackle other big financial, progression-of-life topics like choosing a college.

Here’s your roadmap.

Insurance

Chances are your 7th- or 8th-grader has no idea how insurance works. The policy they’ll need in order to drive legally in your state offers a real-word lesson. Pull out your current auto policy and explain the coverages and your annual premium.

Then tell them that adding a 16-year-old to the policy will likely more than double the premium. According to Carinsurance.com, family auto premiums on average rise more than 125% when a 16-year-old is added to a policy; the bill could be $3,500 or more. Show your teen the website’s teenage insurance calculator.

Here’s where the car insurance talk can help your teen’s personal finance IQ. Many insurers offer a premium discount of 5% to 10%, or more, if the insured teen has a high GPA. You’ve just given them a year or two to double down on studying.

Closer to driver’s-permit age, you’ll want to check with your current insurer — and do some online comparison shopping — to get the best rate and coverage.

Safety

Teens are so expensive to insure because they have more accidents. A lot more. According to the Insurance Information Institute, 16-year-olds account for, on average, nearly 25 crashes for every million miles driven. For 17-year-olds, it drops to 21.1 crashes. From ages 20 to 24, the crash rate of 9.1 per million miles is nearly two-thirds lower than at age 16. And for the record, the rate for drivers between the ages of 40 and 79 is below 4.0.

Lack of experience is a problem, but so, too, are poor choices. A survey by the Centers for Disease Control found that more than 40% of high school students don’t always wear a seat belt, nearly 40% texted while driving, and 17% got into a car where the driver had been drinking.

Parents, of course, are influential, so if you’re guilty of any of the above behavior (texting?), now’s a good time to stop that. And you know your kid best: Think about the right amount, and kind, of information to get their serious attention without causing nightmares.

The right vehicle

If the plan is for your teen to have their own vehicle, this is where you can impart financial lessons that will pay off for the rest of their life.

Buying a used vehicle is always the financially wise move. Explain depreciation. A new car will lose up to 40% to 50% of its value in the first three years. Buying a car that is at least three years old, means you’ve let the prior owner(s) make that financial mistake.

But, if you can afford it, don’t choose a car that’s too old. The Insurance Institute for Highway Safety (IIHS) reports that, based on 2017 data, more than half of the miles driven by teens were in cars at least 11 years old. By comparison, less than 30% of adult miles driven were in cars that old. Given the big advances in car safety tech over the past decade, older models will likely lack some safety features.

Also, steer clear of small “fun” cars that teens may be naturally attracted to. They don’t tend to offer the same protection in a crash as a bigger car (especially when the other car in a crash is a big SUV).

The IIHS and the car-testing pros at Consumer Reports came up with a list of cars that hit the teenager sweet spot: used, but not so old they lack reliability and key safety features, and of a make and size that scores well in crash tests.

In last year’s IIHS/Consumer Reports list, used cars under $10,000 included the 2013 Honda Accord and Mazda 3, and the 2014 Subaru Impreza. For less than $15,000, the recommended list includes the Toyota RAV4, Subaru Forester and Honda CR-V.

You can get the entire list of 60+ recommended cars by searching for “safe used vehicles for teens IIHS.”

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