Procedure

• Just as each state has its own auto insurance requirements for drivers, so too do the laws about reporting your teen driver vary by state. The best way to go about adding a teen driver is calling just before your teen's 16th birthday. Some insurance companies add your teen automatically at age 16 as a fully licensed driver, unless you specify that your teen is not driving or only has a permit. If you live in a state that has a permit age under 16, call your insurance company earlier. You may need to call again to add your teen once she receives her full license, which is when most insurance companies raise your rates.
  
  

Rates

• Insurance rates for families with teen drivers are higher than those for adults because teens represent a substantial risk. Inexperience, along with mental and emotional abilities that are not yet fully developed, make teens more likely to cause and be involved in accidents. According to MSN Money, 16-year-old drivers are three times as likely as 19-year-olds to be involved in a crash. Insurance rates for teens with licenses reflect the higher cost of paying out claims for these drivers. However, the accident rate for permit holders is generally lower, since state laws require teens with permits to have adult supervision or stay off the roads during nighttime hours, when visibility is reduced.
  
  

Consequences

• When your teen gets a permit or license, your state's laws may require you to report it to your insurance company. Even if your state lacks such a law, an accident that your teen driver causes while practicing with a permit might not be covered by your insurance policy, unless you have informed the insurance company of the new driver in the family. You'll likely see your insurance rates spike when your teen trades in his permit for a full license, but they will gradually come down over time. An increase of several thousand dollars in annual premiums is not uncommon, even if your teen doesn't have his own car.
  
  

Reducing Costs

• You can take steps while your teen has a permit or license to reduce the overall cost of insurance. One simple step involves calling your insurance company and listing your teen as a secondary driver (if she doesn't have her own car) or the primary driver of whichever car in the family is less valuable. It may even cost less to buy an old car for your teen to drive rather than allowing your insurance company to list her as the primary driver of one of your expensive, newer vehicles. Safe driving classes, including driver's education at a high school or private driving school, earn teen drivers a discount through most major insurance companies. Finally, make sure your teen knows the rules of the road. A safe driving record will help reduce insurance costs over time.