Limit the expense of teenage car insurance

On the plus side, your new teenage driver will be eager to run all those errands that eat up so much of your free time. Unfortunately, adding your young "gofer" to your car insurance policy is going to cost you--about $621 more a year on average (Insurance.com Oct. 27).

Insurance premiums reflect the company's assessment of risk. Inexperience makes teenage drivers the highest risk group compared with any other age, including drivers aged 75 and older. In fact, teenagers are four times more likely to crash than older drivers, according to the Centers for Disease Control and Prevention.

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So you're going to have to adjust the family budget for your new driver. Your auto insurance premiums will jump by an average of 44% if you're a one-car family, 58% if you own two cars, and 63% if you have three cars (see chart).

Here's how the Credit Union National Association's Center for Personal Finance editors say you can minimize the increased expense:

• Buy adequate coverage. Experts recommend coverage amounts much higher than those typically required by state law. And considering your potential liability for the medical and legal consequences of an accident, you're wise to buy more than the minimum protection. Consider at least $100,000 bodily injury coverage per person for each accident, $300,000 bodily injury an accident, and $100,000 property damage for each accident.
• Ask about discounts. Many car insurance companies offer "good student" discounts for grade point averages above a certain level or membership in some civic organizations. Certain driver-training classes or installation of a monitoring device in the car may qualify for other discounts. In addition, safety features such as anti-lock brakes and anti-theft devices can reduce insurance premiums.
• Hold your teenager accountable. Of course, the best way to save on insurance is to make sure your teenager keeps his driving record clean. John E. Whitcomb, author of "Capitate Your Kids: Teaching Your Teens Financial Independence," recommends making your child responsible for his driving behavior by means of a written agreement with mutually agreed-upon provisions, such as curfews or passenger limits. In addition, you might agree to pay a bonus for each accident-free year if your child agrees to pay some portion of the damage, including increased insurance premiums, for an accident. By spelling out what you expect of your teenager behind the wheel, and the consequences of misbehavior, you're more likely to make your child a willing partner in managing family car costs.