Derek Carawan, AAMS
If you are the parent of a soon-to-be teen driver, you undoubtedly have been thinking about a lot of things lately. Our oldest son has been driving for two years so even though we are past the initial “angst”. I remember the emotions that we were going through all too well. We certainly did share his excitement when he started taking drivers education and I was thankful that someone else had the task of being driven by him while he was training. I mean, they don’t put that second brake pedal on the passenger side for nothing. When he got his learners permit, I pressed that imaginary brake pedal on my side maybe a hundred times or more until I finally got more comfortable with the whole situation. I mean it was stressful for him too. I do think that I am a little better prepared for son number 2’s driving adventures and there is just no other way to prepare yourself for it. You have to experience it to learn how to deal with it. I’ve put together some thoughts for you nervous parents out there. I hope these nuggets help you navigate the experience.
The items that are top of mind for this topic are:
• What type of vehicles should be considered?
• How do you approach the whole insurance issue?
• What type of situations will the new driver and vehicle experience on a regular basis?
My wife and I started a savings program for both of our kids when they were little. In addition to depositing money into their accounts each month, we made them put some of their allowance, birthday and part-time job money in them as well. This account was primarily to fund their first car. So about 6 months before his 16th birthday, we started talking about what type of vehicles might be worth considering. A good place to start is safety ratings. You can ask your insurance agent or go to Edmunds.com or Kelly Blue Book (KBB.com). I then started looking on craigslist, Auction Direct and CarMax to get an idea of what was available and how much things were going to cost. Of course the amount of money that you are able to spend is a big deciding factor, but let me caution you on something that many parents do not think about. If your teen is planning on driving to school, most likely, their vehicle is going to get dinged up pretty bad. So even if you can afford a nicer, newer car, I would think twice about it. After three months a couple of his doors looked like they had been in a rock fight! Life is hectic enough without having to worry about whether your kid’s nice car is going to get damaged every day.
Insuring a teen driver is EXPENSIVE! Now that we have that out in the open (I’m sure that was no surprise), one of the best resources that we found when trying to navigate this issue is talking to friends who have already been through it. Some of the things that you need to find out are:
• Should you add them to your policy or should they have a separate policy.
• If they are going to drive an older car, you may just want to put liability on it. But that means you are on the hook for repairs in the event of a fender bender or act of nature because you opted NOT to have collision or comprehensive coverage.
• Some insurance companies like Liberty Mutual in North Carolina have online safe driver programs that you can pay to take and in turn you are eligible for some discounts for the student driver.
• Michael Berke of Liberty Mutual in Raleigh reminded me that, “a new inexperienced driver in the household significantly changes the overall “Risk Dynamic” or “Financial Exposure” to the household. Each circumstance is different, but coverages to review would certainly include Bodily Injury Liability, Property Damage Liability, and Medical Payments.”
• You may even want to think about adding an umbrella policy if you don’t already have one.
Finally, take into consideration everything that the vehicle will be used for. If your child has to haul around a bunch of sports gear (hockey for example), you may want something with more trunk space or even a small SUV because putting all of that equipment in and out of the car can really mark up the interior. So far our experience has been basically “error” free. I hope to keep it that way.
Derek Carawan is a LPL Financial Advisor and LPL Registered Principal / Securities offered through LPL Financial/ Member FINRA/SIPC and may be reached at, www.carawanfp.com , 919-870-8181 or firstname.lastname@example.org .
These views are those of the author and should not be construed as a solicitation to sell any insurance product or as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information. This information is not intended to be a substitute for specific individualized tax or legal planning advice.
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