A reader worries she could end up paying more as her 17-year-old son starts driving.

3 minute read

I’m a single mom and my 17-year-old son just started driving. He’s saved up to buy his own used car, and now he’s asking me to get us both on “usage-based car insurance” because he says it’s cheaper. But we’ll need to install a device in our cars, so the insurance company can tell how fast and far we’re driving. I get that it could lead to discounts if both of us drive safely, but he’s 17. Can the insurance company somehow use this information against us??

– Pam in Tennessee

Andrew Hurst, insurance writer from ValuePenguin, responds…

Hi Pam,

It sounds like your son has done his homework or was lucky enough to stumble upon some information about a great potential way to save money on auto insurance. Either way, kudos to him. And kudos to you too, Mom, for taking the time to investigate yourself before you dive right into a new type of car insurance policy.

What is user-based insurance?

As a quick overview, usage-based insurance (UBI) is a newer type of auto insurance coverage that more and more carriers are beginning to offer. With a UBI policy you use an app or telematics device in your vehicle that tracks your driving behaviors and the mileage you travel. If you don’t drive many miles and use safe driving habits (like obeying the speed limit), usage-based discount programs could potentially save you as much as 30% on your car insurance premium.

The average cost of insurance for a 17-year-old driver like your son is $5,851 per year. So, a 30% reduction in a premium that size could save you more than $1,700 annually. Even if your savings aren’t as significant, any UBI premium reduction could help you keep extra cash in your bank account that you can use toward other financial needs or goals.

Because drivers are spending more time at home than ever before, consumer interest in UBI has exploded this year. According to Arity, a mobility data and analytics company, the average total miles traveled per household dropped more than 50% in the spring of 2020.

The downside of using UBI on a teenage driver

Of course, it’s understandable that you’re concerned about the possibility of a telematics program backfiring against you – especially as the parent of a teenage driver. The CDC reports that 15- to 19-year-old drivers were responsible for around 8% of the costs of motor vehicle injuries in 2017. That number may not seem all that high, but when you consider that the same age group only makes up 6.5% of the U.S. population, it’s an eye-opening and disturbing figure. The risks that come with insuring these inexperienced new drivers are the reason why insurance companies tend to charge more when you add a teenager to your policy.

Yet your concerns about your teenage son’s driving behavior costing you money might be the very reason you should consider giving usage-based car insurance a try. A telematics device can help monitor your son’s driving behavior when you aren’t in the car with him. It can encourage him to correct bad habits (like accelerating too quickly or hard braking). Depending on the telematics program, you might even get a chance to compete with your son to see who can earn the highest “safe-driving score.”

The upside of UBI – if used correctly

Some UBI programs may give you and your son a chance to improve any less-desirable driving habits over several months before your premium would be negatively affected. (Be sure to ask your insurance provider about its specific policy.)

It has also been reported that participating in UBI programs reduces the risk of car theft – positioning yourself as potentially less risk for insurers.

Remember, if you’re a good risk, insurance companies are motivated to keep you on as customers.

Usage-based insurance – and the discounts that may come with it – are available through several of the largest auto insurance companies in the United States.

It is also helpful to understand that this type of program is often referred to as “per-mile car insurance.” So keep an eye out for that name, too, as you shop around.

Even if you’re not interested in a telematics program, it’s wise to compare rate to compare rates from several insurance providers. Your current provider might not offer the best deal.

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About the Author

Andrew Hurst

Andrew Hurst

Andrew Hurst is a technical insurance writer at ValuePenguin and LendingTree. His analysis has been featured in Forbes, MSN and USA News, among others. He's also appeared in interviews broadcast by ABC and the CW. He previously taught composition and research at Wright State University.

Published by Debt.com, LLC