So my S21 just got his license today – yay!! Now the car insurance price hit – boo!!
Just got off the phone with our auto insurance company and here’s the scoop:
Plus $1200/year just to add him as a driver to our policy. Ouch and no getting out of this.
Plus $1500/year if we buy used car worth about $12k but only get liability and comprehensive. (So just $300 more a year than if he doesn’t have a car)
Plus $2200/year if we buy same car with collision coverage!!
We have $1k deductible (the largest allowed in our state) and I’m thinking even w/ collision we’d only submit a claim if the damage was more than $2k b/c we wouldn’t want rates to go up.
So with collision we’d be basically paying $700/year to get a max benefit of $12k if he totaled the car. Is it worth it? The agent says it takes 3 years for rates for new drivers to start noticeably dropping, though rate would go down some as the car gets older.
Actually, the policy is written every six months. Maybe get the collision the first six months when he’s a brand new driver and then drop it?
Or should we take our lumps and pay for full insurance?
Notes:
Yes, I know we’d save money if he got a less expensive car but this Mom is all about the new safety features. Though we might get cold feet and try to get a car closer to $8 or 9k. That’d make no collision even easier to consider.
He doesn’t have a job so he can’t contribute now. We will likely pay insurance through college for both our kids and then cut them loose. That’s what both our parents did for us.
We always had the largest deductible allowable, split the cost of insurance with the kids (we tried 50/50 but in minimum wage jobs it ended up more on Mom and Dad, but still worth it to hammer home the principal that driving a car is a privilege and that any time you get behind the wheel think really hard because you could kill or maim someone.)
Figure out if you really want him to own a car… comes with all sorts of trouble (including him being the de facto Uber driver for friends, friends of friends, and barely known acquaintances).
I thought I lived in the most expensive state for insurance, but we have never had to pay that much (not for either D or S, who are now 30 & 27). You may want to shop around.
We did carry collision on our cars. I can’t remember what our deductible was on the cars our kids drove, but it was relatively high. When S drove a van that was purchased on a salvage title, we did not carry collision - that wouldn’t have made sense.
Some follow the so called “10% rule.” If your premiums exceed 10 percent of your potential payout, drop collision. Your potential payout is the value of your vehicle minus your deductible. So for OP, that would be $11K. $700 is less than 10% of $11K, so under the 10% rule, it makes sense to get collision coverage.
We bit the bullet and bought collision coverage for our daughter’s car, which cost about $10,500. Not sure how much extra it is, though.
We had just taken collision off our Ford Focus when DS turtled it in December (not his fault - black ice). I wish we’d kept it! We had to junk the car.
I specifically sought out a car for DS20 that I wouldn’t need to carry collision on, because it’s insanely expensive for a teen boy. Even 8 or 9K seems like a lot of car to me for a high school kid (but both of mine combined aren’t worth that). His cost $500 and 200 bales of hay (seriously!). It’s a nice solid Camry though that we knew all the history on and bought from family. He’s been driving it for 18 months now with zero issues. I started out paying $66/month liability on it, but it dropped to $60 after his first year. He’s rated on his car and it didn’t effect the rates on my two.
Yes/yes: you cannot afford the car (but maybe a less expensive one could work).
No/yes: if you buy the car, buy collision insurance.
No/no: if you buy the car, you may not need collision insurance (but consider if you want collision coverage so that rented or borrowed cars are covered).
Also note that, even with similarly priced cars, different make/model/trimlevel cars may have significantly different insurance prices, due to different loss patterns.
I was car shopping for quite a while before DS got his license looking for a deal and every time I’d find one I was interested in, I’d run it by my insurance guy. It wasn’t long before I realized there was a some big difference in rates, so I finally just asked him to send me a list of the makes/models and years he thought would be the best bet. He didn’t give me that, but told me to stick to older mid-sized vehicles.
It is amazing the difference a car can make. I had a Pontiac Vibe, which was more than a few years old. When a deer decided to run into my car, it cost more to fix it than I expected. Turns out that repairs to that vehicle are pretty expensive - I assume that translated to higher insurance premiums than I might have had for another vehicle.
@ucbalumnus – I asked the agent to what extent different makes/models have different rates and she just said generally small cars were cheaper than SUVs and American cars generally had higher rates. She said for the type of similar cars we’re looking at rates wouldn’t vary more than $50 per six months. But, alas, no easy tool to compare; it all seems pretty opaque to the consumer.
@MaineLonghorn – we almost took collision off my husband’s 7 year old commuter car but it was so dang cheap we kept it. I guess when a 55 yo man w/ no accidents drives a Honda Fit they figure he’s a darn good risk! My husband likes his car and doesn’t want to give it to our S which would in some ways make the most sense. But also, I think my S would really benefit from brake assist, blind spot monitoring, and back-up camera – none of which my husband’s car has. Plus, the Fit is awful small and tin can like for a new driver – makes me nervous.
Everyone – thanks for the input. We have reserves so that we could afford to replace a car he wrecked so I realize this would be, in essence, self insuring. But of course, it’d be somewhat painful and at that point we’d probably get him something cheaper and/or put more skin in the game.
I bought collision for both of my kids. We used it once, for an accident where the total cost was about 5K (the dealer told us it would be more) and our rates went WAY up. After that, even though I had collision, I paid myself when they had “little mishaps.” I paid 6K when we had 2 young males drivers. Now they are off our policy, and we pay less than 1500.
Many insurance companies have web price estimators. They may not take into account all of your specific underwriting factors, but you can put in a driver profile and then run it with different cars.
To me, it starts with: can you afford to lose the car if he’s at fault, maybe even before it’s paid off. Even if you pay the full amount at signing, you’d be out that 12k, plus the cost of a replacement.
My vote goes with start him with collision and see how his driving goes. Just being licensed doesn’t mean he’s competent 24/7.
Many new drivers have accidents within their first year behind the wheel (hence the high insurance costs). As noted above, if you couldn’t afford to total the car tomorrow, I would add the collision.
Get collision.
We had our son’s car banged in so many parking lots-school/high school lots/college, never his fault people-hit and run-we had a couple notes because of witnesses with IPhones. Our deductible was only $250 with the Camry, so if the other drivers’ insurance didn’t cover it, then we paid $250 and got it fixed.
I just don’t think I’d be getting a 16 yr old teenage boy a $12K car. JMHO. S1 started with a Saturn sedan 100K+ miles.
We got very used cars for our kids. They were driving to school and activities. Not much out of town driving in the first few years. Two were passed down from H and me, and we got the new car. Bought $5K Jettas for D1 and D2. D2 now drives H’s 130K miles Honda Accord so sold her Jetta. Decent cars and good in Michigan winters.
Never carried collision on any cars for them, and none of them wrecked or severely damaged a car. But if I were buying my teenager a $12K vehicle, yeah I’d be adding collision.