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Insuring teenage drivers

Our soon-to-be-17 son backed into another student's car in the high school parking lot the other day. Police were called, but he was not cited because accident was on private property.

The other family has been very considerate in waiting to get quotes for damage done to door before (if ever) involving the insurance companies. If the repair quote is something relatively 'unexpensive' <!>, then I feel we are probably better off paying it out-of-pocket rather than our insurance company paying it. By the way, no real damage to his car.

Am I using correct logic here?

Our only past experience with the insurance company is that the ONE claim we had with them (my husband backed into someone...) -- after being a customer for 15 years -- raised our premium! The claim was only for $900, the premium was raised $300 per year. I couldn't believe it, other than that one claim our driving records were impeccable....

So now I am so very leery of reporting teen's accident.... it's my understanding that since he wasn't really cited and will get no points against his license, that the insurance company would have no way of finding out.

I am thankful that his accident was minor and no one was hurt... and hopefully this will serve as a very valuable life lesson. But, I am trying to avoid it being a life lesson that will cost 1000s in additional premiums over the next years...
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Comments

  • kinleykinley Posts: 854
    the purpose of insurance is to prevent a financial catastrophe & not pay for small or maintence claims. I agree with your thinking and would not report minor incidents to the company. Any premium increase due to "Claim Frequency" would be more than paying for the door. Please note the above advice doesn't apply when the other car is occupied. A latent claim for bodily injury is a sticky wicket.
  • sharonlpksharonlpk Posts: 37
    I should have mentioned that the car was occupied.... no injuries however.... Again, very minor (thank goodness!) but causing damage nonetheless (I really think that if the bumper had been hit instead, there would have been possibly no damage at all...) At least no possiblity for whiplash claim since the car wasn't hit from behind?

    Thanks for your post :-)

    Sharon
  • kinleykinley Posts: 854
    If you decide to issue your personal check for the amount of repairs - you might consider naming the owner and the occupant(s) on the check. On the back where it is to be endorsed you might want to type: " This releases the payor of any and all claims and liability as a result of the accident of day/month/year." If an occupant is a minor, the parent or guardian would be named as well. Should any hint of injury happen, turn the claim in to your company. Good Luck. kinley
  • auntbeaauntbea Posts: 18
    Follow kinley's suggestion. A friend of mine did the same thing. Since he had a couple of drinks before this happened, he offered to write a check for the damage. The person in the other car was a local minister. The minister cashed the check and then turned the claim in to my friend's insurance company. Minister said the check was for something else and had nothing to do with the damage to his auto. My friend had never even seen this minister before. These things can come back to haunt you if not handled in a way that protects yourself.
  • sharonlpksharonlpk Posts: 37
    Thanks for the advice and opinions! I was thinking of paying the repair shop directly... and possibly then having the owner of the car sign a separate statement releasing us from further liability? If there has been no hint of passenger injury I'm thinking I should avoid 'putting ideas' into that minor's family by asking them to sign something absolving liability...?

    Hopefully tomorrow the car is going in for the estimate.... what appears minor to me may be an unfortunate surprise after seeing the estimate...hope not tho! Am not sure what my 'pay out of pocket rather than turn in to the insurance company' amount is :-) Probably something to do with the number of zeros, LOL!

    Thanks again for taking the time to post,

    Sharon
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,691
    May astound you! Hopefully this won't be the case here. Last summer some idiot bumped my rear bumper in a Costco parking lot. Did he/she leave a note?....yeah, right!

    Didn't look like much but bill came to 800.00.

    I paid the 250.00 deductable and let State Farm pay the rest.

    Should they decide to raise my rates, I'll remind them that we have three cars, the house and other coverage through them and have sent them tons of money over the last fifteen years with minimal trouble. Would that make a difference? who knows?
  • kinleykinley Posts: 854
    hit & run claims usually are not chargeable. Not to worry.
  • kinleykinley Posts: 854
    Please share with us the details of the situation. What was the amount of estimated damage and what decision did you come to for paying?
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,691
    You must be my neighbor?

    Well...good, I didn't know that, thanks!
  • sharonlpksharonlpk Posts: 37
    Hello everyone,

    The estimate we're going with for the car my son damaged is *only* $500.... I was soooo relieved, at least not needing a whole new Grand Am door, etc. The other car's owner has been very helpful in trying to get us the lowest cost possible, we're very fortunate!!

    This was a no-brainer for us to pay out-of-pocket thank goodness!!!!! I will heed the advice about the car's owner 'signing off' so to speak when we issue payment :-)

    Since our son wasn't officially cited due to mishap being on private property, this was probably the best way a life lesson of paying attention when driving could have happened...! Without watching insurance rates sky-rocket...

    Of course, now I'm more nervous again whenever he's out driving :-)

    Sharon
  • kinleykinley Posts: 854
    Having had two teen drivers - your apprehension is understood. To instill better driving each of our teens had a personal $500 deductible to pay in case of any accident regardless of fault. They each paid their deductible, but only once. The connection between the mind and the wallet is very direct. Oh yes, how does your worrying at home help them be safe while away?
  • sharonlpksharonlpk Posts: 37
    :-)

    Thanks for putting that worrying-stuff into perspective! The sound of his car returning to the driveway is a sound, however, that is music to my ears :-)

    By the way, son will be paying the $500...when life's lessons hit the wallet, you are right: they are much better remembered!!

    You're welcome for sharin <!>,

    Sharon
  • auntbeaauntbea Posts: 18
    I guess it must just be a "Mom" thing. My daughter totaled her first new car when she was 18. She is 30 now and commutes about 50 miles per day to work and back in Seattle traffic. She is now an excellent driver and I would not hesitate to ride cross country with her. However, I still worry and breathe a big sigh of relief when I see her online each morning and know she made it safely to work and back again. In only 10 more years I guess it will be grandson's turn for me to worry about. :)
  • eharri3eharri3 Posts: 645
    You think all the money you've been paying to yur insurance company all those years should mean you're taken care of in an accident, but they raise your premium anyway if anything ever happens, meaning they still lose no profits on on the deal because you effectiveley pay your regular premium PLUS a little bit more to cover the cost of repairs.
  • kinleykinley Posts: 854
    The intent of insurance is to prevent the financial catastrophe. The industry is so competitive that only due to investment income are the premiums lower than if pure losses were the only consideration. You can expect your premium for car insurance to rise due to the lack of investment income of late.
  • eharri3eharri3 Posts: 645
    I'm sorry, I thought the way it worked was that you pay insurance premiums so if you get in an accident, the hard earned money you've been forking over all that time pays for the repairs so you don't have to worry about paying out of pocket. The way it actually seems to work is that customers get double billed. You pay your regular premiums, and then if the unthinkable happens, you pay extra every month on top of that so that the company does not even actually have to absorb the cost of repairs.

    My opinion is that there's gotta be something wrong with a system where car owners pay money to stay insured but then when they get in an accident they would rather pay out of pocket to cover the expenses than file a claim with insurance companies whose services they pay for.
  • robertt260robertt260 Posts: 1
    The suggestion that you obtain a release of all claims when you pay for the car damage seems to me to be poor advice.
    If there are two potential claims against you, one for car damage and one for personal injury, you would be paying for the car damage (which you are legally obliged to pay in any event) and asking the other party to surrender a second right for which you are paying nothing. This seems to me to be overreaching and unfair and would be a poor way to repay the other party's generosity in finding the lowest possible estimate.
  • sharonlpksharonlpk Posts: 37
    Hello everyone,

    Last Thursday night I turned over a check for the $500 to the mom of the kid whose car my son hit.... and ended up not asking her to sign anything... I just couldn't do it as they are a very nice family and did try to be helpful to us :-) I should add that we have casually known each other for years and that helped me make this decision... I tried to reverse the situation a moment and wondered if I would have felt insulted if *I* had been asked to sign something after being so cooperative.

    I sincerely do appreciate all of the advice that was given to me here, however!!!!!

    AuntBea, thanks for sharing, it's nice to know I'm not the only mom like this! :-)

    Regarding the discussion of insurance premium payments and then submitting (or not) a claim... My husband and I had been paying--for 20 years!--premiums every year to the same company for auto and home. Almost (ok, 1 minor ticket) a perfect driving record after that, and no accidents that were our fault. *That* is why I was so upset when our rates were raised when a claim was put against us for a small repair that cost an amazing $900...!
  • kinleykinley Posts: 854
    Perhaps this will help. While you were making premium payments for the last 20 years you enjoyed the transfer of risk to another for 20 years. The cost of transfering a risk is promulgated by many factors including losses. If you paid a low premium for 20 years, had 0 losses, the 21st year would be of a low premium as well. When a loss costs over $500 to a carrier, it signals a change in the risk, needing an increase in premium to cover the higher risk. Claim free insureds enjoy the lowest set of premiums, all other factors being equal. It is fair to charge less to the claim free and to charge more to those with claim frequency. Past premiums cover history of risk transfer from you to the company and when your driving history changes, so do the premiums. After three years from a chargeable accident, the premium rate lowers again. The industry doesn't feel that a 20 year relationship with a company entitles the waiving of a rate increase when the quality of the risk is not the same due to the claim.
  • eharri3eharri3 Posts: 645
    To be a part of an industry in which the law basically makes your customers a captive audience.
  • kinleykinley Posts: 854
    It only says you have to be financially responsible. Besides the insurance option,you can in most states, post a $35,000 bond or deposit $35,000 cash to satisfy the financial responsibility law. Insurance is the most economical way to meet the requirement. The captive audience is served by hundreds of insurance companies regulated by 50 state commissions of insurance in a very competitive industry. Not all insurance agencies and companies are enjoying a 'captive audience' for you have the choice of the agent and/or company based on many factors. When I was an agent, the customer was always appreciated, valued, & they were placed with the appropriate company and premium as per their individual case deemed. I am not aware of another system that is willing to take so little for so much potential $$$ exposure.
    The insurance agency income less the cost of doing business, less business taxes, didn't make me a lot of $. The most viable contribution to our retirement portfolio was, as in other families, a working wife. A wise man once said," Envy of others success makes your life unhappy."
  • eharri3eharri3 Posts: 645
    But try to get your car inspected in many states or even worked on by most reputable mechanics without proof of insurance. Also, I don't know many people who have 35,000 to post.
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,691
    Neither my wife or myself have ever so much as put a scratch on a car in all of our years of driving.

    we've been with State Farm for almost 20 years and heve bothered them for very little. A couple of windshields, stolen CD player etc.

    The house is also insured by them.

    And, I've shopped around once or twice when the premiums staggered me. Could we switch to Pemco or go elsewhere and save money? You bet!

    One of the reasons we stay with SF is because of the thought that if a bad accident were to happen that they would consider the 20 years of loyality (and premiums) before dropping us or raising ou rates.

    Friends tell me otherwise. They tell me that insurance companies simply don't care and would drop us like a bad habit if they suddenly decided we were a risk.

    kinley?
  • kinleykinley Posts: 854
    The individual "Beaners" don't have company loyalty, they move around, so they don't have an appreciation for customer loyalty. IMO Pemco is an excellent company, but not what it used to be when Stanley O. was their leader. I'll bet a Pemco agent has purchased a vehicle from you in the past & recommend you contact that agent. Loyalty is heavy at the agency level, but underwriters come and go. Other good companies include Unigard and Oregon Mutual. Because Investment Income contributes to the paying of claims, rates go up when investments go down. On the commerical side of the business, rates are increasing as much as 50%.
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,691
    Yes, kinley, it seems like half of my customers are with Pemco.

    About twelve years ago or so, a friend suggested that we switch from SF to Pemco telling me that we would save massive amounts of money.

    So, I picked up the phone and called them.

    A guy on the phone was VERY concerned about our driving record and asked me if we had ever had an accident or moving violation.

    Never an accident, and my wife has NEVER had a ticket. I remembered that I had picked up a speeding ticket for 45 in a 35 a year before and told him that. BTW, that was my first ticket in probably ten years (I told him that) and I haven't had one since.

    " WELL, WE ONLY INSURE SAFE DRIVERS!"

    Huh...? I reminded him that this was my first ticket in TEN years!

    He mumbled and grumbled and asked what kind of cars we drove.

    Well, at the time one of our cars just happened to be a stock, nice Z-28 Camaro.

    That did it! I don't recall his exact words now, but he let me know that Z-28's are only owned by immature people who intended to drive them fast.

    I was rejected!

    Let's see now....that happened twelve years ago...no tickets since...no accidents...LOTS of money sent to State Farm.

    Think I'll stay with SF.
  • mmcbride1mmcbride1 Posts: 861
    I was told by my SF agent here in Colorado that since I have been accident free for over 9 years, even if I total a car, it doesn't count against me. The next accident would count, though - one freebie. So loyalty IS worth something.
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,691
    I know of an older couple who were with AAA for something like thirty years. Never had a problem until they had the misfortune of getting rear ended THREE times within a year while sitting at stoplights.

    AAA dropped them. Told them they were "accident prone"!

    This really happened!
  • kinleykinley Posts: 854
    Having been involved in the agency side of the business for over 50 years and having purchased four agencies it is my experience that though it may be logical to assume those with minor violations are worse risks, experience has taught that only the claims cost the companies. I do not believe there is a direct corollation as much as the companies would have us believe between minor violations and claims. IMO, the minor violations are used just to increase the premium. ISELL: Three "non fault" accidents is no logical reason to non renew especially when the at fault company paid the three claims and there was no cost to the company represented by AAA.
  • mmcbride1mmcbride1 Posts: 861
    What if they got hit by uninsured drivers? Then AAA would have to pay.
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