As teens dream of drivers' licenses while heading back to school, a new study finds that a rate hike for the family car insurance premium may be far worse than parents bargained for.
If parents fail to comparison shop for car insurance -- or if they give in to their teen's plea for a sports car -- it could add thousands of dollars to their yearly car insurance premiums, according to a new nationwide study of car insurance data by the personal finance website MoneyGeek.com.
The study, which examined data from the five leading insurers in each of the 50 states and the
"We all know that when teens start driving, parents are going to have sticker shock when it comes to car insurance," says
"That's the median price hike we found a middle-aged
Nationwide, parents can expect to see their policies soar when their teen starts driving. And if they don't take the right steps, that price tag could double or even triple, making car insurance an exorbitant proposition.
One key misstep, MoneyGeek.com found, is failing to shop around.
Insurance carriers "will raise the rate on people who aren't comparison shoppers," says
"If you stay with them for four or five years, they will start raising your rates," Hunter told MoneyGeek.com. "It's sort of a loyalty surcharge."
Parents with teen drivers might think they could save a few hundred dollars on yearly premiums by shopping around, but MoneyGeek.com found that they might actually save thousands.
Additional effective ways to save with a teen driver include raising the deductible, bundling coverage with homeowners' insurance and helping teens avoid tickets for risky driving, including speeding, drunk and distracted driving, insurance experts told MoneyGeek.com.
MoneyGeek.com incorporated its study's findings into its 50 state guides to car insurance and road safety, where consumers can compare premium costs among the five largest insurers in their state. They can also find out how their state ranks in terms of road safety and what they need to do to satisfy insurance requirements there.
The aggregate rate hikes for drivers in real life may differ, the study authors point out, since MoneyGeek confined its analysis to the five leading insurers in each state and created profiles of drivers that were consistent from state to state. Other distributions of profiles and policy selections could result in different outcomes.
MoneyGeek.com is a consumer website with a mission to help individuals make smarter financial decisions. MoneyGeek.com staffers are personal finance geeks with decades of combined experience in writing and publishing information about how individuals should manage money and credit. The website offers calculators, tools, and in-depth information on insurance, mortgage, credit cards, business loans, saving and budgeting, and more. Learn more at http://www.moneygeek.com
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