Cheapest ways to insure teen drivers

10:30 AM cheapest, drivers, insure No Comments

Business Week | By Nancy Dunham, CarInsurance.com

No words can spook parents like 'your teen is getting a driver's license.' Here's how to keep insurance costs to a minimum.

Expect to pay a hefty sum to insure your teen driver.

Adding a teen driver to your car insurance policy can boost rates by 20 percent to almost 200 percent, depending on variables that include the state in which you live, the car the teen drives, his or her student status and, of course, your insurer's rules.

So should you just buy your teen driver a bus pass and let it go?

"The downside to not letting your teen drive at all is that they may rebel against you and also endure teasing from friends," says David Bakke of personal finance advisers Money Crashers, based in Atlanta.

Your tolerance for heavy sighs may help determine what you and your teen do next.

Wait. Any brand-new driver – even if he or she is 40 -- will pay more for car insurance, usually for the first three years of licensure. But a teenager also pays for being young, and the price is steep. A 16-year-old may face a surcharge as much as 100 percent. That youth surcharge goes down a bit every year, so a driver newly licensed at 18 will pay less than at 16. (See "What young drivers need to know.")

Hang on to the permit. "Instead of preventing (teens) from driving, consider having them keep their drivers' permits for a longer period of time,” Bakke suggests. Some car insurance companies don’t include the teenager in rate calculations until the new driver is fully licensed. Others do – so ask.

If your teen drives the car alone and wrecks it, you probably will be covered – and then charged premiums as if the teenager were licensed now that the child is driving alone, says CarInsurance.com consumer analyst Penny Gusner.

It’s not like they can’t use the practice with you or another adult, licensed driver in the car. Per mile driven, teen drivers ages 16 to 19 are three times more likely than drivers age 20 and older to be in a fatal crash, according to the Centers for Disease Control and Prevention.

License the teen, but don’t let him or her drive your car. It’s called a named driver exclusion, and it means the insurance company won’t consider the teen when it calculates your rates. But you are agreeing that the child won’t drive your car – and the insurance company will not pay for the damages if he or she wrecks it.

“Not every company may allow the practice,” says Gusner. “And those that do may want to charge you a fee or surcharge for doing so.”

Snag that 'good student' discount. Depending on the company and your state, a good student discount can save you as much as 20 percent, says Dan Young, spokesperson for auto-body repair experts CARSTAR and a 20-year veteran of Allstate Insurance.

In most states, a good student discount is among the biggest money-savers you’ll find, decreasing a typical full-coverage bill by an average of 12 percent, according to data gathered for CarInsurance.com by Quadrant Information Services. In some states, such as Illinois and Minnesota, the average good student discount was nearly 18 percent.

Virtually every carrier offers a good student discount; the usual qualifiers may include full-time enrollment in high school or college, average grades of at least a "B," Dean's List status, or a ranking in the top 20 percent of his or her/class. Often the discounts carry over even after the student has left school, up to a certain age.

Consider a driver safety course. Taking and passing these courses, routinely offered at area high schools, state motor vehicle departments, and elsewhere, generally qualify the teen for additional insurance discounts. The discounts cut a typical full-coverage bill by about 2.4 percent, according to the Quadrant data, but the discount was twice that amount in many states and not available at all in others.

Stay accident-free and ticket-free. You don’t want to be on the wrong side of an accident claim with a teenager on the policy. Insurance companies also can levy surcharges after accidents or major traffic violations. With a teenager on the policy, that surcharge gets multiplied again.

Let’s say your $100-a-month liability car insurance bill doubled when you added your teenager to the policy. Then you have an accident, triggering a claims surcharge of 25 percent.

On a policy by yourself, your bill would rise to $125. With the teen, it goes to $250.

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To really keep your rates low, do all you can to prevent your teen from becoming involved in an accident. The National Association of Insurance Commissioners (NAIC) released a report showing that teens whose parents set rules and were engaged with their teen drivers were 50 percent less likely to become involved in a crash.

"As parents, the ultimate goal when our kids start driving is to ensure their safety and the safety of others. That starts with establishing expectations," says Jim Donelon, president of the NAIC and Louisiana insurance commissioner. "The good news is that by setting boundaries, we are making the roads safer for everyone."

Review your policy. If your teen leaves for college and won't drive your car, you may want to see if your insurer will temporarily remove him or her from your policy.

But, cautions Jim Sutton, president of James F. Sutton Agency in East Islip, N.Y., "you need to be sure the car is definitely home and not away with the student. After a period of at least six months, the young driver can elect to purchase his or her own policy with your policy or go out and get his or her own coverage without having the 'inexperienced operator' surcharge applied." Of course, the length of time varies depending on the insurer.

Lastly, no two insurance companies calculate your rates the same way. If there were ever a time to compare car insurance rates, now is it.

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The countries with the cheapest gasoline

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While Americans and Europeans bemoan the cost of gasoline at the pumps, people in some other parts of the world enjoy filling up their tanks cheaply thanks to subsidies provided by wealthy, oil-rich governments. But fuel subsidies tend to benefit the rich (who own motor vehicles) more than the poor. The IMF estimated that 65 percent of the fuel subsidies in Africa benefit the richest 40 percent of households (2010). Only 8 percent of the $410 billion in government fuel subsidies worldwide went to the poorest 20 percent of the population.

The British insurance firm Staveley Head has released the latest list of the world’s gas pump prices. Here are the 10 cheapest countries on Earth to fill a gas tank.

1. Venezuela — $0.18 per gallon
With elections looming in October 2012, President Hugo Chavez knows that raising gasoline and diesel prices would be a risky move politically. His presidency is already threatened by his deteriorating health, providing a unique opportunity for the opposition’s candidate, the telegenic Henrique Capriles Radonski, to replace the ailing leader. The last time the government attempted to raise gasoline prices in 1989, riots ensued, and hundreds of people died. Venezuelans are likely to continue paying less for fuel than bottled water for years to come.

2. Saudi Arabia- $0.48 per gallon
OPEC recently announced that Saudi Arabia’s proven oil reserves were surpassed only by Venezuela. However, the Latin American nation is much less attractive to major oil investors, leaving Saudi Arabia as the world’s largest exporter of oil — now, and for years to come. There may be problems, however. A cable released by Wikileaks from Riyadh, written in 2008, revealed that senior Saudi officials expressed worry that the country’s reserves may have been massively overstated — by 40 percent. As tensions rise over Iran’s nuclear program, Saudi Arabia will have to address an additional challenge as well: How long is the country willing to export 9 million barrels of oil per day, up from January’s 7.5 million, to keep global oil prices from rising even higher?

Saudi Arabia spends about $13.3 billion a year to subsidize gasoline and diesel prices, Abdullah Al Shehri, governor of the Electricity and Cogeneration Regulatory Authority, told the Gulf News.

3. Libya — $0.54 per gallon
During last year's revolt against the Qaddafi regime, Libya’s oil infrastructure was heavily damaged. Many oil fields were mined, ports were the sites of fierce battles between opposing rebels and Qaddafi forces, and the country’s largest refinery, Ras Lanuf, was shut down. Today, under the provisional governing authority of the National Transitional Council, Libya is in the process of restoring its capacity to produce and export oil.

The Libyan Oil Minister Omar Shakmak said that the administration expects to reach the pre-conflict levels of about 1.6 million barrels per day by the summer of 2012, up from the current 1.265 million. The boost in production along with the country’s political stabilization could help keep global oil prices in check.

4. Turkmenistan — $0.72 per gallon
The recent re-election of President Gurbanguly Berdymukhammedov for a new five-year term mothballed plans for short-term dramatic changes occurring in the authoritarian Central Asian country. This likely means that automobile owners in Turkmenistan will continue to be entitled to 120 liters (34 gallons) of free gas a month, rendering the $0.19 price of a liter almost meaningless to some auto owners. The government has promised subsidies on an array of fuels, lasting until at least 2030. However, petroleum reserves are estimated to be relatively low, so it is unclear if the government can deliver on that promise.

5. Bahrain- $0.78 per gallon
Bahrain has relatively little oil compared to its neighbors and is working hard to diversify its economy – unlike many others on the list. Bahrain has emerged as a banking hub for the Persian Gulf and has expanded into retail sales and tourism. It signed a free trade agreement with the United States in 2005, and was cited by the UN as the Arab world’s fastest-growing economy. Given the unrest among the Bahraini Shiite population, the demands for political reforms, if not the end of King Hamad’s rule, it's unlikely that gas subsidies will end anytime soon.

6. Kuwait — $0.84 per gallon
Kuwait has the sixth-largest oil reserves in the world and is one of OPEC’s top oil-producing and oil-exporting countries. Oil export revenues make up half of Kuwait’s GDP and 95 percent of state revenues. The Kuwait Petroleum Corporation plans to increase oil production capacity to 4 million barrels per day by 2020. Kuwait consumes a very small part of this oil domestically: Last year, 87 percent of Kuwaiti oil was exported.

Kuwait's fossil fuel subsidies were highest on a per capita basis, with $2,800 spent per person, according to Earth Policy Institute. The United Arab Emirates and Qatar followed, each spending close to $2,500 per person.

7. Qatar — $0.90 per gallon
As well as being the world’s largest exporter of liquefied natural gas, Qatar is an OPEC member and was the 16th biggest crude oil exporter in the world in 2009. Qatar’s own oil consumption has more than tripled since 2000, due to a growing economy (and low-priced, subsidized gasoline). The Gulf country has the second highest GDP per capita in the world, estimated at $102,700 in 2011. Qatar's proven oil reserves are at 25.4 billion barrels, and oil and gas revenues make up 50 percent of its GDP.

So far, the kingdom's economic growth has been spurred by its petroleum wealth. However, Qatar is attempting to diversify its economy and brand itself as a global "knowledge" powerhouse. In 2009, the Qatar Science & Technology Park (QSTP) was inaugurated, a 2,500 acre complex consisted of 80 research, educational, and science centers. Leading US universities such as Carnegie Mellon, Texas A & M, and Georgetown are offering various academic programs there.

8. Egypt — $1.14 per gallon
Egypt is a significant oil producer and has the largest refining sector in Africa. But due to rising domestic demand, it does import some petroleum products. Production has declined, though modestly, and was at 736,000 barrels per day in 2010. Natural gas is expected to become a larger source of revenue due to increased exploration.

Catherine Hunter, an analyst at British IHS Global Insight, commenting on the economic impact of the Arab Spring said that, "If you look at how other sectors have been declining, oil and gas investments and Suez Canal revenues have remained the two pillars of the Egyptian economy during the turmoil," UPI reports. Apache Corporation, an American oil and gas exploration firm, says it will invest $1 billion in the country in the next two years.

9. Oman — $1.20 per gallon
Oman has the largest proven reserves of any non-OPEC country in the Middle East, at 5.5 billion barrels. Production has increased 20 percent since 2007, reaching 860,000 barrels per day in 2010. Oil and gas exports were 47 percent of GDP in 2010 - led by Asia destinations. BP is contemplating whether to invest $15 billion in a gas project. "The project will make a lot of money for Oman; we just need to find a way to get a big enough piece of it for BP to make sense as an investment," Reuters quoted Jonathan Evans, BP Oman general manager, as saying.

Oman is trying to diversify its economy, with government investment in the agricultural and health services sectors. The sultanate has made education a priority, investing in basic education by establishing colleges and trade schools and offering scholarships for international studies.

10. Algeria — $1.20 per gallon
Algeria, an OPEC member, has the third-largest proven oil reserves in Africa behind Libya and Nigeria. It was the continent’s fourth largest producer in 2010 following Nigeria, Angola and Libya. The European Union relies on the North African country to meet its environmental restrictions because of the Algerian oil has a low sulfur content. Its industries are mostly nationalized and the government restricts imports, privatization, and other foreign involvement. A majority (60 percent) of Algeria’s income comes from oil production.

In order to combat high youth unemployment, the government proclaimed in 2010 that it would invest revenues from oil and gas exports in building new museums, theaters, and libraries.

Unlike Saudi Arabia, Algeria will not increase its crude oil exports because of the escalating tensions (and oil prices) over Iran's nuclear ambitions. "We have a program in place that will be maintained," said Youcef Yousfi, the Algerian Minister of Energy and Mining, the China's state-run Xinhuanet reports.

This story originally appeared in the Christian Science Monitor

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