Uber for Teens?

Last week Uber announced they were rolling out a new service specifically geared towards teen riders. While there are obvious questions about safety, if uber gets this right, it could be an absolute game-changer for parents (and insurers).

Why is this such a huge opportunity for uber? In short, insuring teen drivers is a problem. It’s a problem for parents because the insurance rates are insane and they’re a problem for insurers because those insanely high policies still aren’t necessarily profitable. 

Before we jump in to a short cost benefit analysis of using uber for teens, let’s first answer 2 quick questions every parent should think about…

When do you need to add your teen to your insurance? 

As soon as your teen gets licensed, you should add them to your policy. If they’re licensed but not allowed to drive, you could consider adding them as an “excluded operator” which will cost you much less then adding them as a household operator but know they might not be covered in an auto accident. 

How much does it cost to add a teen to your policy? 

The national average to add a teen to your insurance is just over $325 per month but the range is wide based on several factors with some parents paying over $500 per month. After you add in other costs like fuel, depreciation, maintenance and loan interest, parents could be looking at over $1,000 per month increase in their household expenses even if they buy a modest vehicle for their teen.

Cost-Benefit Analysis of uber teen

Because of these rising costs mentioned above, many families simply can’t afford to buy their teen a car. With this new service from uber, families now have another option. Although uber hasn’t announced pricing specifics, I think it’s safe to assume they’ll use a pricing model very similar to the one they already use and perhaps even underprice in the first year or so in hopes of getting people to try it out. If you live 10 miles or less from school, maybe the ride cost $20 each way? If your sharing with a neighbor or two maybe you get that price down to $5 per ride and that begins to sounds pretty attractive even if you are taking a few rides a day.

But is it necessarily a good idea to let your teen take an uber? At first, I had a real hard time thinking I would ever let my kids in a car with a stranger but then I challenged myself to think of the safety “pros” before completely ruling it out.  The number 1 pro is the uber driver is significantly more experienced. They’ve had a license for far more than twenty-four hours so can’t really debate that one. Another potential pro is that compared to your teen, the uber driver is probably less distracted. There’s probably some debate here because we’ve all been in some bad ubers but I’d argue that at scale, sixteen to eighteen year olds are more distracted than just about any age group on the planet. 

How can you as a parent make it even safer?

No matter what, you’re always going to feel uneasy about your teen in a car with a stranger but maybe you only allow them to uber with a friend? Maybe you only allow them to use it to/from certain places? Maybe you require they be on the phone with someone the whole trip? 

So is this a good idea? 

I think it depends a lot on your individual financial situation but I imagine saving $500 to $1,000 per month is going to look real attractive to a lot of people. Many families in metro Atlanta simply can’t afford to buy, and insure, a vehicle for their teen and I’m just glad these parents now have another option to consider.

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