Reduce the cost of insuring your teen driver with USAA

Way back in 2008, our daughter reached the age of 15.5 and took the test to earn her learner’s permit.

Licensed to learn.

She was pretty excited about this modern rite of passage. I was pretty excited about how much our insurance premiums would jump for the next few years.

This was before my blogger relationship with USAA, although by then I’d been a customer for over 25 years. When I phoned USAA with the news that our daughter was behind the wheel, the member service representative assured us that USAA doesn’t charge an additional premium for teens on a learner’s permit. Our teen was driving our car under parental supervision, and presumably we’d be a little extra vigilant about not running into anything… or at least not filing any insurance claims.

Six months later (and after many many practice runs through the Wahiawa obstacle course driver’s test route) our daughter scored her license.

When I phoned USAA with that update, the member service representative gave us the amazing news on the boost to our insurance premium: zero. We would pay nothing extra to have another driver in our house. Even the member service rep sounded a little surprised at what her system was telling her: our daughter was classified as an “occasional driver”.

I was completely frank with USAA about who the “occasional drivers” would be from then on. Our daughter was going to get her driving experience as our personal chauffeur. Until she left home for college, she drove to school and she drove the family everywhere. She ran every household driving chore and errand. I didn’t even set foot in a grocery store for nearly two years.

The USAA rep said that the occasional-driver discount was no problem. We had three drivers in a household with only two cars. Only two of us would be charged as regular drivers, and the third driver would be occasional. It didn’t matter to USAA which one of us was in that category. The rep wasn’t exactly sure why the system was being so nice to us, but she checked with her supervisor and she was positive that we wouldn’t pay more.

The years went by. I finished writing the book, sold it to a publisher, and started this blog. In 2011 USAA invited me to one of their conferences, and during the last five years I’ve learned quite a bit about their programs & policies. In 2012 our daughter bought her own used vehicle and started her own USAA account, which ended our four-year run of paying zero extra for a young driver.

Last month Kate Horrell (who’s also raising teen drivers) asked me why USAA never charged us to insure our daughter.

I have to admit that I hesitated to ask USAA’s experts about their young-driver rules. What if there had been a computer system error (or some other horrible mistake) and USAA wanted to catch up on years of premiums?!?

To my relief, it turned out that everything was done correctly. USAA’s Communications department connected me with Lindsey Ruiz, a public relations representative for their Property & Casualty insurance section. I learned a lot more about premiums.

First, it turns out that insurance companies don’t charge for teen drivers on a learner’s permit. Student drivers are under the supervision of a licensed driver, and they have to get their training somehow. Besides, it’s the best way for the insurance company to grow new customers– they can pass up a few months of premiums to reduce the cost of earning a license.

The second bit of information astounded me: Hawaii state law does not permit insurers to set their premiums based on age or experience. There are some restrictions on licensing (like requiring driver education classes for earning a license under the age of 18) but the insurance companies can’t charge extra. Plenty of data shows that younger drivers and inexperienced drivers have more accidents, but Hawaii doesn’t let the insurance companies charge for it.

It turns out that Hawaii is not the only one. According to a University of Michigan Law School research paper on insurance anti-discrimination laws, eight other states also prohibit using driver age to set insurance premiums: California, Colorado, Georgia, Maryland, Massachusetts, North Carolina, Oregon, and South Carolina. More states restrict the use of driver age and experience in setting premiums. Even New Jersey insurers can’t discriminate based on the driver’s age, but New Jersey allows insurers to set their premiums by the driver’s experience.

And finally, USAA could only charge for two drivers in our household because we only owned two vehicles. If we’d bought a third vehicle for our daughter then we would also have had to pay the full price of insuring a third driver.

House rule: you drive, you change the oil.

I learned that USAA also offers good-student discounts (3.0 GPA or better). On the other side of the fee schedule, insurance companies can also set premiums based on the client’s driving record. If the teen has an accident or receives a ticket then they’ll be subject to the same “premium adjustments” as any adult.

I don’t want to get into how I know about that, but it’ll take me three years to clear my driving record of that speed trap. Only seven months to go.

USAA also offers License+, a safety tool that gathers driver data and displays it on a smartphone app. (It also includes lifesaving emergency notification features.) It’s a voluntary program and it doesn’t affect premiums, but it’ll certainly facilitate many useful discussions about acceleration & braking techniques.

[Note:  here’s an update on USAA’s Automatic License+, along with a free $25 Amazon gift card.]

I’ve learned a lot, and now I won’t lay awake at night wondering why we weren’t charged extra.  Thanks for asking the question, Kate!

When your teen decides to start their driver training, don’t despair about your insurance premiums. Check those links above to see whether USAA can give you a good deal. Don’t buy a vehicle if you’re eligible for the occasional-driver price break… and maybe only if your teen qualifies for the good-student discount!

(Federal Trade Commission disclosure: “A few times over the past five years, USAA has paid for a portion of my transportation, food, and lodging costs at conferences and the Pro Bowl. You might wonder whether that would affect the objectivity of a financially independent Navy nuclear engineer. Instead it’s subjected their staff to hours of brutal interrogation, raised cynical questions about their math skills, and inspired outright skepticism of their high employee satisfaction. As a geezer member since 1981 I’ve been especially inquisitive about their retirement calculators and their financial products. Several execs have been ambushed with hostile questions about providing business checking to USAA members, and I’ve stalked several more execs through followup phone interviews. We bloggers also drank all of their coffee, ate all of their breakfast burritos, abused their WiFi bandwidth, and made fun of their underwear vending machine. I’ve attempted to balance the scales by distributing omiyage of Kona coffee and chocolate-covered macadamia nuts, which could justifiably call into question the objectivity of their employees. But I’ve enjoyed the conferences so much that I’m hoping to repeat the experience!”)

Related articles:
The Finances Of Used Cars
Buying A Used Car On A Cash Advance In A New Town
USAA announcement: New Tool For Teen Drivers Helps Keep Them Safer Behind The Wheel