Insurance companies often use a person’s driving history to measure the amount of risk in a potential client. They’d be able to accurately calculate their premium, rates, and the best policy for the driver.
Inversely, the risk may be high for people with little to no driving history or record-like a new driver or someone who just got their license. Because of this, car insurance rates for new drivers can be expensive during the first couple of years of coverage. There’s a multitude of factors that can determine the best new driver policy, such as how often they’ll be driving and their age.
A teenage family member may have received their license after graduating from a learner’s permit, or an older relative who hasn’t driven a considerable amount or never before decides to get a driver’s license. Insurance companies offer affordable new driver coverage and are willing to take on the risks associated with them.
Who are these new drivers, and why do they need insurance?
New driver insurance doesn’t refer to the coverage itself. There’s no special policy. A new driver would be added to a new or existing one. It’s the rates and premiums that are subject to increase. Even new drivers have to meet the state minimum insurance requirements.
Drivers that are classified as new and could have higher rates are;
- Teen with a driver’s license. The most common of new drivers for insurance companies. Often, teens will get their licenses while still in school and be added to their parent’s policy. High risk is associated with this group because they are more likely to be in an accident.
- Adults with a new driver’s license. Some people may start driving later on in life and receive their first license around then. With no driving history to assess, the insurance company will label them as high risk.
- Driving history gap. For whatever reason, suspended license or canceled insurance, a person may have spent significant time away from the wheel. If the history gap is big enough, the insurance company may label the driver high-risk.
- Foreign drivers. Drivers that are new to the U.S. are labeled first-time drivers by insurance companies since traffic laws may differ in their home country. Some drivers may have to adapt to driving on the other side of the road. Driving records are national.
What kind of car insurance are new drivers required to get?
Minimum insurance coverage varies from state to state. Policyholders will often purchase more coverage than the required liability insurance.
The required liability coverage for drivers, both old and new, are:
- Bodily injury insurance per person. This bodily injury insurance covers another person in the event of an accident. How much you pay for your per person limit is how much their medical bill will be. The minimum amount required by law is $15,000 in most states.
- Bodily injury insurance per accident. This bodily insurance covers more severe accidents with multiple people involved. Instead of covering an individual medical bill, it would be the collective of the drivers injured. The minimum required amount is $30,000 in most states.
- Property damage insurance. This insurance covers damage done to another’s property. That’s their car in this case. The law requires that you take financial responsibility for any property damage you cause in an accident. The minimum required amount is $5,000 in most states.
- Uninsured motorist coverage. Some states require that you have uninsured motorist coverage in the event you have an accident with someone with little to no coverage.
- Personal injury protection. Sixteen states require that you have insurance coverage that will help you cover your own medical costs.
Why is there so much insurance risk associate with new drivers?
The risk that comes with new drivers is universal to insurance companies. Trackable driving history is what helps insurance companies calculate your rates based on how safe your driving is. Without one, an insurer may not know what to expect when taking you on as a policyholder.
So, the high-risk association with new drivers is automatic. However, after a couple of years of safe driving and practice, you’ll notice your rates decrease as the insurance companies find you a less risky driver. A safe driver who got their license when they were 16 may see a premium decrease by $400 by the time they turn 25.
Aside from driving experience, another huge factor in new drivers is always age. A reported study finds that younger and older customers pay more for their car insurance than those in their mid-life. Young drivers, usually in their teens, are associated with the highest level of risk due to their likelihood of becoming involved in an accident. Older drivers tend to be more careful, but they’ll still pay an above-average premium than other drivers.
What are other pricing factors when it comes to new driver car insurance?
There are a couple of other factors to take into account when considering car insurance for new drivers aside from age. While something as simple as gender or marital status may affect your insurance quote, the company may also look at your credit score. While not a driving record, your credit score demonstrates your ability to be financially responsible. That’s a desirable trait that all insurance companies look for in their drivers.
Every state has its own insurance regulations that factor in an area’s population and crime demographics. So, your premiums would also be dependent on where you live. Above all, the insurers will look at what kind of car you drive or own.
For new drivers, it’s more cost-effective not to drive a luxury or sports car. Pickup trucks may also result in higher premiums. The best cars for new drivers would be budget vehicles with low-tech safety features for the best rates. Lastly, the insurance company may determine your rates based on how much you drive the car.
What are insurance options for new drivers?
The previous list is of the mandatory coverages by the states. There are several other insurance plans that may cost extra but would insure your vehicle and reimburse you adequately.
In the event of an accident you either caused or were a part of, coverage options can include a:
- Comprehensive policy. It covers any and all damage done to your car that’s circumstantial when you’re not driving. Examples would be weather-related damage, theft, or vandalism. Buying comprehensive coverage may increase your rates.
- Collision policy. It works the same as personal injury protection and, in some states, literally is. Since covering damages done to your own car in an accident you caused isn’t required by law in all states, it’s great to have the option of being reimbursed for your personal damages. Buying collision coverage may increase your rates.
- Pay-per-mile policy. This unique insurance coverage allows you to pay based on the miles you drive your car. An insurance company may give you a device for your car which tracks your mileage. There’s usually a monthly charge of around $30, with additional cents added on for every mile you log.
Why would Pay Per Mile coverage make sense for new driver car insurance?
A pay per mile policy would make the most sense for a driver car that doesn’t drive their car as much. Perhaps a 16 or 17-year-old who gets their license doesn’t drive their car all the time. Maybe they don’t need to use it for school, and their bike commute is better. It’s best to cover them by the limited number of miles they put on the car instead of a full-time or primary driver.
The same could also be said for young or new drivers heading to college. Campuses are always designed with the intention that the students would walk or not face a lengthy commute to class. Because of this, the time they spend in the car may be limited. Pay per mile insurance can save a customer up to 40% on their bill. There are specialized insurance companies that offer such plans.
How do I find the best and affordable car insurance for a new driver?
A premium for a new driver could range anywhere from $1100 to $1600 alone. Both national and local insurance companies may offer different starting rates or discounts. However, smaller companies’ treatment may be more tailored. So, it’s best to get and compare quotes for your new driver.
To get the best insurance value, you should:
- Remain on the family insurance policy. It isn’t economical to insure a new teen driver on their own policy. It can cost almost $3,000 for half of a year. Naturally, the best option would be to be insured as a driver on the family coverage since it’s the head of the household’s credit score and driving history being surveyed.
- Drive a modest Sedan-type car. As we have gone over, the car make and model directly affects your insurance premiums. A luxury or sports car with the latest high-tech features can result in higher rates. Pickup trucks and other bigger cars can also raise your rates. The best car for a new driver insurance-wise is a modestly priced car with good safety features. In some cases, a used one is a smart, cheap alternative.
- Bundle to save. If you were to carry multiple insurance coverages with one company-like home insurance or renters, then you may be eligible for what is referred to as a multi-policy discount. Homeowner’s insurance may result in a larger discount since it is more expensive than renter’s insurance.
- Pay total directly and upfront. Paying your insurance monthly can result in being charged things like a convenience fee. If you’re able to pay your total coverage, you could pay it all upfront to save up to 10%.
- Multiple cars insured. If you were to insure a new car with an insurance company you already used for a previous vehicle, then the company may offer you a discount. This would be ideal for new drivers and their vehicles.
What are some more of the discounts an insurance company can offer a new driver?
Discounts are something to pay special attention to when shopping for new driver insurance. We’ve discussed how an insurance company can offer discounts to recurring customers.
Now, here’s how you personally can qualify for discounts and save on your new driver insurance:
- Safe driving discount. Insurers love clean and good-looking driving records. Safe drivers literally are less risk and therefore subject to discounts and low rates.
- Defensive driving. Taking a defensive driving course shows the insurance company that you are attempting to become a safe driver.
- Safety feature discount. Safety features like theft deterrents or a stolen vehicle recovery system can qualify you for a small discount if the insurance company finds them installed on your car.
- Good student. Students or new drivers on the honor roll or with a GPA of 3.0 can qualify for a good student discount. Transcripts should be shown every six months to show continued academic achievements.
- Accident forgiveness. If you’ve only had one minor accident that you were able to handle, then you can qualify for an accident forgiveness discount.
- Occupation or military. Doctors, educators, police officers, and military are occupations that insurance companies offer discounts for. Insurers may ask for proof of employment or a business degree.
- High deductibles. Paying high deductibles will result in lower premiums. In comprehensive and collision insurance, lower deductibles can raise your rates. Choosing to pay the higher deductible will be cheaper than paying the premiums.
What does car insurance for new drivers typically cost?
It helps to know the national average for the cost of new driver car insurance so that when you receive a quote, you’d be able to tell if it’s accurate. Let’s say that a twin brother and sister turned 16 and got their licenses. Naturally, they would be on their parent’s coverage. The brother’s premiums would be around $2,783, and his sister’s would be $2,280. The difference in male and female premiums is $100-$400 less for female drivers.
Around the age of 18, they would be able to take out their own insurance policy outside their parent’s. The premiums would be $5,727 for the brother and $4,983 for the sister. By the time they turn 21, their premiums may decrease by $2,000 to $2,600. These are averages, so your own rates may differ depending on your personal and vehicle circumstances.
Insurance companies don’t frown upon taking in new drivers. More business is always good. It’s the amount of risk associated with new drivers. To a degree, it’s every new driver’s responsibility when first looking at insurance to stress to the company that they are worth covering despite the associated risks. At the same time, everyone always wants to save money. By now, you’ve learned to do both.