Do Teens Need Auto Insurance if They Have a License but No Car?

Teens need to be listed on their parent's auto insurance policy if they are going to be driving the family car. Adding a teenage driver will raise your rates, but it's usually the cheapest option. Learn what kinds of coverage your teen driver needs.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Jun 13, 2022

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Things to Remember...

  • Teenagers can only drive a vehicle that is covered by auto insurance  
  • A teenager can be covered by an auto insurance policy even if they don’t have a vehicle of their own yet
  • Non-owner auto insurance or extended coverage from the vehicle owner’s car insurance can provide the legal and financial protection teenagers need to keep driving legally

There is nothing like an excited teenager that just got their license and now wants to drive on their own. Many teens don’t own their own vehicle though, and instead, drive their parent’s or another family member’s car most of the time. So do teens need to carry their own auto insurance even if they don’t have a car? 

Every teenage driver in your household must be covered by auto insurance, even if they don’t own a car yet. Here’s how that can work.

What insurance do licensed teens need if they don’t have a car? 

Teen drivers need to be covered by their parent’s car insurance policy. Adding a teen driver to your policy will extend the liability and even the collision coverage on your policy to them.

Now, car insurance is usually connected to the vehicle, not the driver, so your teen can safely borrow a friend’s or neighbor’s car on occasion if necessary. As long as everyone who is driving is legally entitled to do so, ie: they have the permission of the owner, they are fully licensed, and they are not impaired in any way, then car insurance will cover teen drivers even if they don’t have their own policy. 

There are also non-owner policies, but it is unusual for teens to take out this sort of coverage. The other important thing to note is that the insurance company should know if the teen driver is a primary driver. This can have an impact on the insurance rates as teen drivers are riskier than older drivers. 

Some state auto insurance laws require that all licensed drivers carry auto insurance while others only require people with registered vehicles to carry auto insurance.

The table below, for example, shows the graduated license system in Colorado. 

RestrictionsLearner's PermitRestricted LicenseUnrestricted License
Age15 – if enrolled, attending, and participating in driver's ed
15 1/2 – if completed a four-hour driver-awareness course
16 – if none of above
If under 18, one year after obtaining learner's permit17 – if held restricted license 12 months
18 – otherwise
PassengersMust be supervised by a licensed parent/guardian or their licensed adult appointeeFirst six months – no passengers under 21
Second six months – limit of one passenger under 21
(exceptions: siblings, family emergencies)
No restrictions
HoursNo restrictionsFirst year – no driving between midnight and 5 a.m. (exceptions: presence of a parent/guardian, driving to and from school activities or work, family emergency, being an emancipated teen)No restrictions
Cellphone UseForbiddenForbiddenForbidden if under 18
PrerequisitesIf under 18, parent or guardian must sign an affidavit of liabilityCompletion of 50 hours supervised driving, 10 of which at nightIf under 18, holding a restricted license for one year
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The reason why 16-year-olds pay more for insurance — or, rather, cost more — is due to their lack of experience. The more history you have proving you are a safe driver, the lower your insurance costs. 

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How can teens get auto insurance?

A teenage driver can pay for their own insurance or be an added driver on their parent’s policy. It depends on your situation.

Using a Parent or Guardian’s Auto Insurance Policy

If a teenager is your child, relative, or someone else living in your household, you can list them on your insured list so they can be automatically covered. For teens under 18, this may be the only option you have because they are children and not permitted to sign legal documents like insurance contracts.

However, let’s say that your teenage neighbor needs to borrow your car to run errands.  Although that individual doesn’t live in your household and isn’t your child, they can still be covered under your insurance as permissive users. Such drivers are usually allowed to drive your car while enjoying the auto insurance coverage you paid for as long as they only use your vehicle on occasion

Remember though, that teenagers under your insurance can significantly increase annual insurance premiums, forcing you to buy more than the minimum coverage you may prefer. So, it is usually cheaper to include them in your policy than to pay for their insurance separately.

In addition, you need to pay close attention to who gets designated as a primary driver if there is more than one person on an insurance policy. If you have two cars and one is pretty expensive, your inexperienced teenager should not be designated as a primary driver on the policy for the more expensive vehicle. That’s because teenagers will generally be charged more for insurance. So, you should list them as an occasional driver for that car and take advantage of the available rates.

Can a teenager have their own policy?

For teenagers over 18 years, it may be wiser to let them assume some or all of the burden of paying for car insurance, especially if they will be living away from home some of the time. However, the cost of their coverage will be far higher due to their lack of experience, which means they are likely to get into accidents. 

Also, the more expensive the car they drive, the higher their insurance premiums will be. And some vehicle types, like SUV’s, which are bulky and more challenging for teenagers to handle, will also attract higher coverage costs because they are likely to be involved in accidents.

It is also worth noting that if your teenager has their own policy and they get into an accident, the insurance rates will increase significantly after that.

What insurance do teen drivers need and why?

Statistics show that drivers aged between 15 and 20, who have little driving experience, are responsible for 7.8 percent of all fatal accidents. Also, according to the Insurance Information Institute, vehicle accidents are the second-leading cause of death among teenagers. There is no doubt about it: auto insurance is a necessity for teenage drivers.

So, it’s safe to state that teen drivers must have some form of coverage. But what insurance do teen drivers need?

No Fault-Coverage

Across the U.S., 12 states have no-fault insurance laws. They include Florida, Pennsylvania, and Minnesota, among others. And in those states, you can’t rely on the other driver’s insurance to cater to all your medical expenses, even if they are at fault. That’s because your right to sue the other driver is pretty limited. If you live in such a state, your teenager should have personal injury protection (PIP) coverage.

PIP coverage will cover the expenses arising from bodily injury of the teenager even if they are at fault. In addition, the insurance will pay for the lost wages, attorney fees, and even child care expenses of the insured parties. However, the driver liable for the accident will cater to the vehicle damage expenses through their insurance.

Liability Insurance

At the very least, teen driver’s insurance should include liability coverage because it is mandatory across the country. The insurance will financially protect your teenager if they are responsible for harming other people or their property while handling your vehicle or someone else’s car. And without it, they should not drive.

All states except New Hampshire require some form of liability auto insurance. But even if you reside in that state, you should get it for your teenagers anyway. Otherwise, if they are at fault for an accident, their parents and guardians may be sued and forced to compensate someone. And that money is likely to come from your pocket if they are unable to pay it.

Coverage For the Car

Liability insurance covers third parties, which leaves you or another vehicle owner holding the bag for any expenses incurred if your car is damaged while in the care of a teenager. Therefore, you need to pay for insurance that covers vehicles while in motion and when parked.

Collision and comprehensive insurance covers tend to take care of most eventualities. But you can also include additional coverage to pay for medical expenses after the accident regardless of who is at fault, vehicle breakdowns, and expenses incurred when the other driver is at fault but has no insurance.

Licensed Teens With No Car Still Need Insurance

Teenagers should be covered under the liability insurance attached to the car they are driving even if they have a license but don’t own their car. This is necessary because any car on public roads must be insured by law. 

That way, even if they get involved in an accident while driving a vehicle other than your insured ones, they will be protected from some or all of the financial consequences that arise. It is also wise for them to have collision and comprehensive coverage too because of the higher risks associated with teen drivers.

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