Getting your first car is a milestone. You may have gotten it when you were still in high school or received it before heading off to college. The point is that you’re a new driver eager to get some miles under your belt. It’s around this time; you’d think about your first insurance policy.
Let’s talk about young drivers and their insurance, particularly those heading off to college. Students, and young drivers in general, are known to pay the highest insurance premiums. Insurance companies often use young age and the lack of driving experience as grounds for a higher risk driver. The general stat is that drivers ages 16 to 19 are three times more likely to get into an accident than drivers age 20 and up. It’s during this time when the driver is usually in school.
However, you’re reading this because you are a young driver or have a young driver going off to school and looking to save on the new driver rates. Maybe there are discounts you qualify for. Or, perhaps the best course of action would be to remain on the parent’s policy. So, here’s what car insurance for students costs, covers, and what the smartest course of coverage would be for a new student driver.
What’s the regular auto insurance coverage for students and young drivers?
A teen driver usually receives their license while they’re still in high school at the age of 16. Until they turn 20 and have a tangible driving history, their rates will be considerably high. Car insurance companies use driving records to determine premiums. Because new drivers don’t have one yet, the associated risk is often high leading to expensive premiums. So, drivers who just received their license are generally placed under their parent’s existing auto policy. Granted, the premium increases a minimum of $100, but it’s a more economical option than purchasing their own policy. Being covered under an existing policy is required if the young driver has a learner’s permit.
The annual cost of a new policy for a high school-aged driver can range from $1,700 to $3,500. The cheapest new driver insurance is around $1,840. When a student enrolls in college, the rates may fall slightly, but they’ll still be in this range. It’s not the grade in school that matters, but the age of the driver. That being said, the discounts that will be discussed later can apply to both a high school and a college student.
Why is car insurance for college students not cheap?
There are other factors that contribute to high rates for new and student drivers. A nonexistent driving record is a red flag for some insurers and a reason for the driver not to be added on to an existing policy for less.
However, if you need your own auto policy for college or school, it depends on:
- General location – Rates are based on zip codes. If a student driver is going to college, their zip code may change. Thus, they may be subject to different premiums. Rural communities tend to run up higher rates.
- Age – Insurance companies always look at the driver’s age. Insurance premiums decrease when the driver turns between 20 to 25 years old and has more driving experience.
- How frequent the drivers drive – If a younger driver with no driving records is frequently on the road, then the premium will be higher, along with the chance of getting into an accident.
- Place of residence – If your home address is still listed as your primary address, then you may remain on your parent’s policy. Students checking into college dorms may be an exception to this. Those renting apartments in the university town may be required to have their own insurance.
- Name on car title – When parents buy a new car, they may put their names and/or the new driver’s name on the vehicle title. If the car has both names on it, the new driver may stay on their auto policy. If only the new driver is listed on the title, they may have difficulty doing so and may require their own policy.
When would a student or young driver need their own policy?
The textbook example of a young driver or student who needs their own auto policy are those in college away from home and driving on a full-time basis. At that point, the only way they would be able to stay on their parent’s existing policy would be for the vehicle title to have their name on it –either as co-owners or primary owners. The same goes if the driver is going to school in-state. If they leave the car at home and don’t drive while away, that car could still be covered by the existing policy.
New policies for students may not be necessary if there are gaps in their coverage. For example, they decide to leave their car at home after spring break. There’s now a lapse in coverage which can cause premiums to rise. It would be wiser to be on the parent’s existing policy. Permissive use is an add-on that covers inconsistent drivers. There’s no age limit to being covered on a parent’s policy. A good rule of thumb would be to keep all drivers under 25 years old on a family or household policy –when the rates start to drop.
How much insurance do college students or young drivers need?
Going to an out-of-state school is an important insurance matter because each state has its own insurance requirements for drivers and their vehicles. If a young driver is covered by their parent’s policy, then they exceed these requirements. When shopping for their own insurance, it’s imperative to know the minimum and optional coverage available.
For most states, liability insurance is a legal requirement. This is the coverage that insures personal injuries and property damage you’ve caused to another driver. In addition, they could also add on collision and comprehensive coverage. Collision would cover yourself and your vehicle as opposed to just the other driver’s. Comprehensive insurance covers your vehicle should it be stolen, vandalized, or affected by bad weather. Both of these can be added for an additional cost. Note that this isn’t the most low-cost option.
Pay-per-mile will be a low-cost option if the student isn’t driving their car often. Most college campuses tend to be closely knit together, reducing the need for students to drive from class to class. If the car spends a significant amount of time in parking, pay-per-mile would be the best option. This would include collision and comprehensive coverage on its own.
What’s the minimum amount of car insurance required for college students?
Not just college students, but all drivers, in general, are required by law to have a minimum degree of liability insurance. This is to keep uninsured drivers off the road.
The four types of auto insurance liability coverages are:
- Bodily injury – The amount the policyholder pays if another driver is injured in an accident they cause. The average state minimum per person is around $15,000.
- Property damage – The amount the policyholder pays if they damage property (public or private) in an accident. The average state minimum per accident is $25,000.
- Personal injury – The amount the policyholder pays for their own injuries and medical costs when involved in an accident. Personal injury is not required in all states, and minimum costs vary.
- Uninsured motorist – This insurance covers the policyholder when they’re involved in an accident with an uninsured or underinsured driver. This isn’t required in all states, and the average per accident tends to be around $20,000.
What are some car insurance discounts for students?
There are several discounts available for students shopping for their own insurance. They’re all based on vehicle, policy, and even personal.
Here are some ways you can save on a new policy for a young driver:
- Multi-policy discount – Insurance companies offer a bundle discount if more than one coverage is purchased. Most college students buy both auto and renter’s insurance –since they may be renting their own place at school.
- Resident student discount – If attending school out-of-state, college students can save their parents money by leaving their car at home. A resident student discount is for those who won’t be driving the family car while they’re away.
- Anti-theft discount – Insurance companies give auto insurance discounts based on a car’s safety features. Anti-theft devices include alarms, ignition cut-off, or vehicle tracking. Essentially, anything that would deter car thieves.
- Good student discount – Good grades will earn more than the honor roll; they’ll earn discounts on car insurance for college students. High school students may be offered the same. Insurance companies look for students with a GPA over 3.0.
- Driver education discount – There are driver’s ed and defensive driving courses that insurance companies approve. Presenting completion certificates can result in a discount on a new auto policy.
- Payment discounts – Paying yearly premiums all at once instead of monthly can save hundreds of dollars under a policy. At the same time, direct payments can also discount an auto policy. Insurance companies smile upon financial responsibility.
- New car discount – Having a car make and model from the current year can make a driver eligible for a discount. However, it shouldn’t be a luxury or oversized vehicle, which can cause premiums to skyrocket for new drivers.
What does car insurance for a student cost?
The average cost of car insurance is around $900 to $1,100 annually. Paying $75 a month is usually what motorists in America pay to keep their car insured. When it comes to younger drivers, the premiums can be more than three times that amount. For a young driver in high school or college, the average cost would be $3,816 annually. That’s around $318 monthly. The difference is quite vast.
There’s no low-cost alternative for insurance for young drivers unless they remain on their household’s existing policy. The only way to reduce premiums is to create a consistent and safe driving record. Over the years, the insurers will take notice and lower the rates. However, another way to save is to start small with pay-per-mile or permissive use. Using a car conservatively can save on insurance while steadily building a driving record.
Some final wisdom when it comes to shopping for your first auto insurance policy is to think about how much coverage you need. If you’re going to bundle renters and auto insurance to save money, think about how many assets are in your apartment or car and whether or not you would be able to afford it. Vice versa if you find that you don’t have a whole lot to cover other than your car. Be aware that some policies may sell you more coverage than you need. Lastly, keep track of all the discounts that apply. One discount can save up to 5% on your policy; imagine what a couple more can do.
Contact your insurance agent today and ask what type of auto insurance can best cover the college student in your life. If you’re in college yourself, then consider this a course in student auto insurance.