Auto insurance is expensive. For newly licensed drivers it can be very expensive. Every newly licensed driver has visions of driving the latest sports car fresh off the lot to school, college or work. However, they do not have visions of the financial responsibility it brings. I have quoted many an auto policy for inexperienced operators and listened to the raw emotional reaction to the premium, whether it’s the young driver or the parents of the driver. Auto insurance for new vehicles and with a new driver can cost around $4,000 a year. Collision alone can cost $2,000.
The best way to offset this premium is to buy an older inexpensive car for less money that doesn’t require a bank loan. This way, Collision is not required on the insurance policy and the premium is not as expensive.
I would then recommend that these drivers (or any driver of an older vehicle) carry Limited Collision. Limited Collision is just that, limited. It does provide coverage for a collision, only if you are less than 50% at fault and you can identify the person that hit you. This means that there is no coverage for single vehicle accidents or hit and run accidents. This coverage option is very inexpensive and does offer some protection for the vehicle. Limited Collision will generally run under $300 for older vehicles with a newly licensed operator, however, it really depends on the type of vehicle. The premium for an older vehicle with Limited Collision becomes much more attractive than the premium for a brand new vehicle with full coverage and monthly car payments.
For any parent of a newly licensed operator, or soon to be licensed, give them a homework assignment. Make them get quotes for the vehicle they want that requires full coverage and they one that they can afford with Limited Collision. For more information about navigating the ins and outs of insuring a new driver, I would be happy to speak with you or you can stop in to any of our nine convenient FBinsure locations.