By Getting a Driver’s License at 16, Young People Can Set Back Families by More Than $33,000 in Insurance Costs

Adding a young driver to an existing car insurance policy is significantly less expensive than purchasing a separate policy or insuring a vehicle for which they are the primary driver. However, even the cost of adding a young driver to a policy can be prohibitively expensive. When preparing for a new — and young — driver, families should consider their financial situation and long-term budget.

According to LowCostInsurance rate data analysis, the average cost of adding a 16- to 19-year-old driver with high academic marks to a family's auto insurance policy — even as the third operator of a vehicle — is $4,799 per year. Without a discount for good grades, insurance for a teen can cost an average of $5,109 per year, though costs vary by location.

Depending on the state, the cost of adding a teen, even with a discount, can exceed 10% of a family's income. Furthermore, data suggests that families in the poorest neighborhoods of the largest cities may face insurance costs that are thousands of dollars higher per year than what the wealthiest residents of the cities would pay to add a young driver to a policy.

The annual cost of insurance decreases by 37% for families that add a 22-year-old driver compared to those who add a 16-year-old driver

Adding a teen to an existing car insurance policy is prohibitively expensive. The average annual cost of designating a 16-year-old as a driver of an insured vehicle is $5,380. The cost of insuring a young driver decreases as the individual grows older. If the young driver waits until they are 22 years old before getting their license and signing up for insurance, the cost of coverage drops by 37% to $3,931 per year.

The total cost of adding and keeping a driver on a policy from the age of 16 to 22 is $33,091 over a six-year period.

Adding a 16-year-old driver to a car insurance policy typically consumes 6% of a family's annual budget until the driver reaches the age of 23. While this may not appear to be a large sum, expenses can vary greatly depending on location. In six states, at a cost of $10,623 per year, insuring a 16-year-old consumes more than 10% of a family's budget. In Michigan, where auto insurance is notoriously expensive, the average family could spend more than 20% of their income on insurance.

However, carrying a teen or young adult driver on an existing car insurance policy is not always expensive. The average cost of adding another driver in the five least expensive states for 18-year-old car insurance by percentage of income is $2,867 per year.

However, in the five most and least expensive states for adding a teen or young adult driver, adding a driver to an existing policy is likely a better deal than purchasing a separate policy.

In the most expensive states, adding an 18-year-old driver to an existing policy is frequently less expensive than purchasing stand-alone coverage for them and their own car, for which they would be classified as the primary user.

However, it is still prudent to consider whether purchasing a separate policy for a teen driver is appropriate for one's budget. Because teen car insurance is expensive, the combined cost of a teen's policy plus a policy for the parents may be greater than the cost of adding a driver.

Rates for North Carolina not featured due to unavailable data.

Good student discounts can result in 6% cheaper rates, but they don't affect the expenses a typical family allots to car insurance

From the ages of 16 to 22, adding a teen or young adult driver who qualifies for a good student discount to an existing policy results in a 6% annual savings. Families with 16- and 17-year-old drivers whose grades are good enough to qualify for the discount can save the most money, as there is a 7% difference in insurance costs with and without the savings.

Most families should not rely solely on these savings to purchase coverage for their young or teen drivers. The financial burden remains significant, as the combined cost of auto insurance for a 16- to 22-year-old driver with a good student discount on a family policy is $31,331.

In other words, the costs of insurance for a young adult driver should account for 6% of a typical family's budget with a good student discount and 6% without. As a result, the potential savings for a family do not increase over the time it takes a teen to reach the age of 22.

As with young drivers who were not students or did not qualify for a good student discount, the overall cost of insuring a good student driver can consume a sizable portion of a family's budget. While the average cost of adding a young driver to an insurance policy is about 6% of a family's annual budget, the cost can be much higher in some states.

Car insurance for 18-year-old drivers costs more than 10% of a typical family's budget in five states. Again, even with a good student discount, insurance can consume 19% of a family's budget in Michigan. Furthermore, in the most expensive states, the good student discount reduced total annual expenses by less than 2%. The largest insurance providers in Florida showed no change with the discount applied.

The table below shows the percentage of income that a family of three devotes to car insurance in each state if they add one 18-year-old driver with good grades to their policy. The second column compares the costs of insuring a driver who does not qualify for a good student discount. The average difference between policies with and without a discount is only $263 per year, indicating that a significant portion of a typical family's income is not designated for insurance.

Rates for North Carolina not featured due to unavailable data.

The neighborhoods earning the least are paying hundreds or thousands of dollars more for insurance than their wealthier counterparts

Because of the disparity in car insurance quotes for poor and wealthy families, those with lower incomes will be less able to afford an extra driver. It also reveals a more fundamental issue of inequality. Because the base premium is higher for lower-income families, it is more difficult for those people to afford to drive legally, limiting their ability to move around for work or pleasure.

LowCostInsurance compared the cost of car insurance in the wealthiest and poorest areas of the country's three largest cities: New York, Los Angeles, and Chicago. The Federal Highway Administration estimates that these three metropolitan areas have more than 101,000 miles of highway. Nonetheless, despite the prevalence of roads, access to low-cost car insurance is not guaranteed.

In New York City's five poorest ZIP codes, insurers quoted a $3,929 higher annual rate for families adding one driver — aged 16 to 22 — to an existing policy than for a similar consumer in the city's five wealthiest ZIP codes. Indeed, drivers in the lowest-income area, which includes the South Bronx neighborhood of Hunt's Point, were charged $4,856 more to add a 16-year-old driver to an existing policy than a comparable shopper from Lower Manhattan's Tribeca.

While driving isn't the most popular mode of transportation in New York City, 24.6 percent of workers 16 and older in the Bronx ZIP code own at least one vehicle, while this figure rises to 25.7 percent in the Tribeca ZIP code.

Los Angeles and Chicago have similar stories. Drivers in Los Angeles' poorest neighborhoods are charged $441 more per year on average than those in the wealthiest areas. However, unlike in Chicago and New York, coverage in parts of the opulent Bel Air costs slightly more than in Downtown Los Angeles. Unlike New York and Illinois, California has more stringent insurance rating laws that prohibit insurers from using non-driving characteristics to determine costs.

In Chicago, those who live in the poorest neighborhoods may pay $2,242 more per year than those who live in the wealthiest areas. Car insurance is $2,329 more expensive in North Cook County than in Chicago's Englewood neighborhood.

Methodology

We examined data for 16- to 22-year-old drivers who qualified for and did not qualify for good student discounts. In each state, we calculated the cost of adding these drivers to an existing policy as the third driver of a vehicle. The insured vehicle's primary drivers were the young driver's 45-year-old parents.

For our city analysis, we gathered rates from the ZIP codes that comprise the nation's largest cities by population and their suburbs, as defined by county borders. Our data comes from the counties listed below:

• New York
• Kings
• Queens
• Richmond
• Bronx
• Cook
• Los Angeles

The insurance rate data used in LowCostInsurance analysis came from Quadrant Information Services. These rates were obtained publicly from insurer filings and should only be used for comparison purposes, as your quotes may differ.