Buying the right auto insurance for your teen driver

When parents of a teen first watch their baby take the wheel, they may be too busy seeing the years flash before their eyes to focus on insurance for the family's newest driver. Putting a new teen driver on the road can be scary -- and expensive.

"Aside from the insurance aspects, parents need to appreciate their role as the risk manager for their teens who drive," says Greg Serio, managing director at Park Strategies LLC, who is also a former insurance commissioner of New York.

Limiting a teen's hours of operation, restricting the number of riders in a car, and prohibiting the use of cellphones or texting devices (which can be double-checked through the cell service bills) are all ways a parent can prevent or mitigate risks."

Adding a teen a policy

Some auto insurance companies will want you to add your teen when he gets his learner's permit; others will wait until he has his license. It's important to call your agent to check.

Ray Crisci, senior vice president and worldwide automobile manager for Chubb Personal Insurance, warns parents that they may not be covered if their teen gets in an accident before they have been officially added to the policy.

"My best advice is to call your agent or insurance provider when it's time to add a teen driver to your auto insurance policy. This is important because some insurers (but not Chubb) have a drop-down provision in their policies that limits coverage for operators that are not listed on the policy," says Crisci. "You should tell your insurance agent as soon as your teenager gets his/her permit."

Now down to the nitty gritty -- choosing coverage.

Corrin S. Trowbridge, owner and broker at San Francisco-based Farmers-Trowbridge Insurance, who has helped many parents add teens to their policies, says that parents need to think big when deciding how much coverage to buy.

Trowbridge explains that families with teenage drivers need high liability limits because teens are among the riskiest drivers on the road, and if they cause an accident, the injured party can come after the parents' assets. You're not buying higher limits for your teen's assets - you're buying the higher limits for your own protection.

He notes that if parents raise their coverage levels and raise their deductibles, they may not add to their overall premium cost. The deductible is the amount you must pay out of pocket if you have a collision or comprehensive claim. When you raise your deductible, your premium goes down.

To find out more about coverage options, read these car insurance basics.

Fitting it into your budget

Many parents are already operating on tight budgets. The initial cost to add a newly licensed teen driver can be as much as three or four times what an adult driver would pay, says Crisci.