GETTING STARTED Life Insurance Made Simple Smart Shopper's Guide to Auto Insurance Fill the Holes in Your Homeowners Insurance Buying Your Own Health Insurance Health Savings Account Answers Why You Need Long-Term Care Insurance MORE... INSURANCE TOOLS How much should I put in my flexible spending account? Estimate your medicare prescription drug savings How much life insurance do I need? How can I reduce mortgage insurance costs? Recent Columns An Enterprising 7-Year-Old - Feb. 3, 2005 Investing Resources for Teens - Jan. 27, 2005 Establish Money Rules up Front - Jan. 20, 2005 Save Now to Avoid Financial Aid Crunch - Jan. 13, 2005 Roth IRA Rules for Kids - Jan. 6, 2005 Parents Can't Tap Child's Custodial Account - Dec. 30, 2004 MORE ...

MONEY SMART KIDS
Car Insurance for Twenty-Somethings
by Janet Bodnar

We have promised to buy our son a car when he graduates from college this spring, but he will have to pay for insurance. What's the best way for him to get a good deal?

Your son may not like the answer -- and you may not either -- but the best way for him to save money on a policy is to own a used four-door sedan and live at home.

Conservative cars, especially those with safety features such as anti-lock brakes and airbags, are favorites with insurers. And if your son is living with you, he may qualify for a multi-car discount even if the car is in his name rather than yours.

Sedans, by the way, don't have to be boring (see "The Year of the Sedan" in the upcoming May issue of Kiplinger's Personal Finance magazine). I love my Volkswagen Passat -- which ranks high on both safety and style -- and so do my kids.

For twenty-somethings, the gap between insurance premiums for men and women is narrowing. Although rates for young people trend down slowly from their peak at age 16 or 17, the age penalty doesn't disappear until they reach age 25 or so.

Figure on $100 a month as a base premium, says Brad Schneider, of Schneider Insurance in Columbus. In a big metropolitan area, "annual premiums could be $2,500 or more for someone right out of college," says Mike McCartin, who owns an agency in College Park, Md.

Aside from obvious variables -- such as a driver's age, record and location, and the type of car -- other factors that affect how much a person pays may not be as apparent. For example, your credit rating helps determine your premium, so good credit it critical.

If your son is not living at home, he may qualify for a rate discount if he buys renters insurance through the same company. Because renters coverage is relatively inexpensive -- $150 to $250 a year -- the savings on car insurance could pay for the premium, giving him a two-fer.

Raising the deductible (and paying more out of pocket in case of an accident) also helps lower insurance premiums, and the impact is bigger for younger drivers than for older ones, says Schneider.

Twenty-somethings should get rate quotes from several companies, starting with the one their parents use. When shopping for a new car, call ahead to determine how much it would cost to insure each vehicle you're considering.