Reduce the cost of insuring your teen driver with USAA

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

Image of a 15.5-year-old with a driving learner's permit in front of Wahiawa Police Station |

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.

Image of a 16-year-old licensed driver changing the oil on a Prius |

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

WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. Wow, same experience here in Idaho, USAA’s phone rep assured us (several times) our rates wouldn’t go up for our teen driver’s underage license, as long as we only had 2 vehicles and 3 drivers. Occasional driver program, and teens aren’t allowed to drive here during hours of darkness, so still getting rides from us to school and sports; we sold our 3rd car, and let her get a license, rather than staying on her permit. $1300/yr increase yesterday. Good grief!

  2. On the phone with USAA now, they said my rates are the same with my two teens listed as occasional drivers as they were when they were listed on the cars.

  3. USAA does charge for an occasional teen driver. My 16-year-old son cost an additional $76 per month. The occasional teen driver is not assigned to any particular car. When the occasional driver goes to college, and is assigned a vehicle, the rate goes up substantially.

    • Here are two things to keep in mind between our different situations, Rob:
      1. Insurance laws vary by state, and your state may allow USAA to charge a premium for a teen driver– even an occasional one.
      2. In our household we had three drivers for two cars, and our daughter did not own her own vehicle. USAA chose to consider her an occasional driver, and it’s probably because Hawaii state law allowed this.

      I’d encourage everyone– especially active-duty military– to check their state’s laws and USAA’s premiums whenever they’re in a new state.

  4. Hi, I am in California. I got a quote from USAA, it took almost two hours of my repeatedly asking “so this won’t change when she gets her license”. They said as long as she doesn’t have her own car, no, it costs the same. She had been driving us as a family for over a year, and she’s great, straight A’s, responsible, etc. We enjoy having her her drive us. Well, we let her get her license. USAA had messed up our policy by putting in April instead of August as our six month term date and were charging us extra. I called to fix that and they cancelled the policy and had to re-enter my info and the new quote was $6 more. Ok, fine, I’m paying more for their mistake. But then I said my daughter now had her license and they said, now you will pay an additional $188 per month. $68 more than State Farm who I’d left after 20 years based on USAA’s blatant lie. Yes, they flat out lied. Now I can’t have my daughter drive us to the store, or home at night when I don’t like to drive, unless I work out their ridiculous rate that is three times what I pay per month. Yes, I’m angry and everyone should know they do this. I requested someone review the original conversation that was recorded and reported them to the CA commission.

    • I appreciate your comment, Rebecca, and I’ve reached out to USAA’s Communications team.

      Another option is contacting the Member Relations team through the USAA app/website and a supervisor.

  5. I just added my son as an occasional driver, we only have two cars and I specifically asked if we would be charged. Yes, USAA charges even for an occasional driver. To the tune of $600+ per six months. :(

    • I find it so interesting how much rates vary. I just got a quote for my son in MD (Baltimore Co. suburbs NW of Baltimore)…occasional driver, good student discount, drivers ed class discount… 900+ per six months. To be fair it was a “ballpark” quote as he still has his learner’s permit so I’m hoping it will go down a bit. I am a 20 year USAA member so am hesitant to shop around but wow, just wow…this will double our premiums and he won’t even have a car!

      • I hear that, Ann. The laws are a chaotic patchwork among the states, and every insurer has a different tolerance for risk versus market share.

        If you decide to use the “Automatic License” hardware, please let us know how it works out!

    • Sorry to read that, Rachel.

      In the year since this post has been published, the entire insurance industry has been raising their rates:

  6. Surely other drivers are paying more for their insurance because of this law (Hawaii rates not based on age/experience). Must have been an interesting debate when that law was being passed.

    • I agree, Gerald! We don’t carry collision or comprehensive insurance (which is also expensive), although we do carry a high liability limit (which is relatively cheap). We’re retired so we only drive a few thousand miles per year. My speeding ticket notwithstanding, we also have good-driver discounts.

      I remember that a decade or two ago the legislature debated paying for insurance “at the pump”– per mile driven. I don’t think that bill was passed.

    Comment? Question? What's on your mind?