Numerous factors influence the cost of auto insurance policies, including age, gender, and driving history, with younger drivers typically facing higher rates.
However, various strategies can be used to obtain discounts and savings on your car insurance policy. These include consulting with insurance providers and regularly comparing quotes.
Why is Age a Factor in Car Insurance Rates?
Teen drivers are some of the drivers with the most risk due to their inexperienced driving history. Teenage drivers ages 16 to 19 are more likely to be in fatal accidents than any other age group. Because of this, car insurance premiums may be higher for teens.
Once drivers reach their early 20s, their car insurance rates begin to go down. By the time they are 25, drivers will notice a significant drop in their car insurance rates. A clean, accident-free driving record and no insurance claims can also help your car insurance rates decrease throughout adulthood.
Car insurance rates are typically higher for drivers under 25 due to several components that make them a higher risk in the eyes of auto insurance companies:
- Statistical Risk: The primary reason is the statistical data. Drivers under 25, especially males, are more likely to be involved in at-fault accidents than older drivers. This elevated risk is shown in this age group’s higher average premiums.
- Lack of Driving Experience: Younger drivers have fewer years of experience, so they might not handle challenging driving situations, as well as more experienced drivers.
- Risk-Taking Behavior: Young drivers, particularly those in their late teens and early twenties, are statistically more likely to take risks while driving a vehicle. Risky driving includes speeding, driving under the influence, not wearing seat belts, and being distracted (e.g., using mobile phones).
- Brain Development: Research has shown that the human brain, particularly the prefrontal cortex involved in decision-making and risk assessment, fully matures around 25, influencing judgment and behavior on the road.
- Economic Factors: Younger drivers might need more financial means to adequately maintain and repair their cars, which could pose additional risks. Due to budget constraints, they might be more inclined to opt for older, less safe vehicles.
- Peer Influence: Younger drivers are more likely to be influenced by their peers, which can lead to riskier behaviors if they are driving with friends or trying to impress others.
- Less Likely to Have Families: Drivers in their late 20s or older might have children, making them more cautious drivers. Younger drivers are less likely to have this responsibility, potentially influencing their driving behavior, such as drunk driving.
Given these components, insurance companies charge higher auto insurance rates to drivers under 25 to compensate for the increased likelihood of these drivers filing claims.
It’s worth noting that as drivers under 25 establish a safe driving record, their car insurance rates can decrease over time.
Also, there are discounts for young drivers, like “good students,” or for completing approved driver’s education courses.
What Factors Affect Car Insurance Rates?
Factors such as age, gender, credit score, accident-free driving record, and state can all impact how much your car insurance rates will cost.
Coverage Type
The type of coverage you choose will impact your car insurance rates. Basic policy limits, deductibles and optional coverage choices all play a part. Standard policies include collision coverage, personal injury protection (PIP) or medical payments, liability coverage, uninsured motorist protection and comprehensive coverage but availability may vary by state.
Optional add-ons like rental car reimbursement, sound system protection and coverage for towing and labor may be worth considering.
These options provide great protection but will add to your overall premium.
Driving Record
Your driving record is a big factor in your car insurance rates, whether positive or negative. A clean record may qualify you for a good driver discount, 10% to 40% depending on your insurance company. Most insurers require you to be accident free for a certain number of years before you’re eligible for such a discount.
Conversely, a history of multiple insurance claims, even if not your fault, will increase your car insurance rates. Drivers with high accident rates pay an average cost of 50% more for car insurance than those with a clean record. The number of accidents you’ve had and your overall driving experience also impact your car insurance rates.
Gender
The following six states do not use gender as an insurance rating factor: California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania.
The annual trend shows that males pay more for car insurance than females. However, other components can affect your car insurance premium, apart from the state in which the driver resides.
Car Usage
How often and how far one drives, whether for daily commuting or occasional use, can influence car insurance rates. Commercial cars usually have different rates than personal cars.
Credit Score
In many states, your credit score can affect your car insurance rates. For example, a female driver with a bad credit score might have a higher car insurance premium than their counterpart with a good credit score.
By law, the following four states cannot use credit history as a rating factor: California, Hawaii, Massachusetts, and Michigan.
Factors related to the individual driver and external considerations influence car insurance rates. It’s always beneficial for consumers to understand these components to optimize their car insurance coverage and costs.
At What Age Does Car Insurance Go Down for Male vs. Female Drivers?
In most states where insurers can use gender to calculate car insurance rates, the big shift happens at 25 for men. On average, car insurance goes down 12% for men at 25, compared to 9% for women.
At 25, the average rates for men is 2.5% more than for women. That’s a big difference from the 11% difference at 18 and 6% at 23.
Stats explain why young men pay more. According to the American Automobile Association’s (AAA) Foundation for Traffic Safety, men are more likely to drive aggressively than women. And according to the National Highway Traffic Safety Administration (NHTSA), men 21-25 are nearly three times more likely to be in a fatal car crash than women of the same age. Insurers charge more for men to account for that extra risk.
But in some states, it’s illegal for insurers to use gender to calculate car insurance rates. Those states are:
- California
- Hawaii
- Massachusetts
- Michigan
- Montana
- North Carolina
- Pennsylvania
Regardless of gender, car insurance rates for men go down with age. By 32, men and women are the same.
Does Car Insurance Go Down at Age 25?
Yes, drivers' car insurance rates tend to decrease as they age, especially once they move out of the high-risk bracket typically associated with being under 25.
Here are some general milestones and considerations regarding when and why car insurance costs might decrease for drivers under 25: being a 25-year-old driver, having an established driving record, marital status, your car, location, insurance coverage, bundles, and deductibles.
When drivers come of age on their 25th birthday, car insurance rates decrease steadily. By this age, many drivers have a history of safe driving and have accumulated several years of driving experience, making them less risky in the eyes of insurance companies.
Suppose a driver starts driving at 16 and maintains a clean, accident-free driving record with no traffic violations or accidents. In that case, they might see a gradual decrease in their auto insurance rates with a clean, established driving record even before turning 25.
What are Ways to Lower Your Auto Insurance Premiums?
By reviewing your policy and adjusting your car insurance coverage to your needs, you get cheaper car insurance rates. For instance, choosing a higher deductible would help you go down on your premiums. Choosing the type of car insurance coverage you want (e.g., comprehensive, collision, or liability) can also impact your premiums.
- Marital Status - Some insurance companies offer lower rates for married couples, even those under 25, based on statistics that suggest married drivers are involved in fewer collisions than single drivers.
- Switch to a safe car - Switching to a safer car, not a sports car, can help your auto insurance premiums decrease, as can opting for a used car over a new one since this vehicle type has more safety features.
- Move to a better neighborhood - Living in areas with low crime and fewer accidents might result in lower premiums. Suppose drivers move from a high population density urban area to a safer suburban or rural area. In that case, just changing your zip code will cause their annual rates to decrease.
- Reduce coverages - Reducing your car insurance coverage (e.g., switching from comprehensive to minimum coverage limits) can also help your premiums decrease, but this also means less protection. Hence, it’s crucial to weigh the pros and cons.
- Bundle Policies - Car insurance with other policies, like renters insurance or homeowners', can sometimes result in discounts.
- Raise your Deductible - Choosing a higher deductible can reduce your car insurance premium. However, when you change your deductible it also means that the driver will have to pay more out-of-pocket in case of a claim.
It’s important to remember that individual experiences vary based on the insurance company, location, driving record, and other components. As always, it’s a good idea for drivers to shop around and negotiate with insurance providers to get the cheapest car insurance rates.
Discounts for 25-year-old drivers
When you’re shopping for the best rate, it’s important to ask insurance companies about the car insurance discounts they offer young drivers. An insurance agent won’t always try to apply every discount you are eligible for, so it’s important to ask. Some common discounts young drivers are eligible for are listed below.
- Good Student Discount - Many insurance companies also offer savings for students under 25 who maintain good grades, known as good student discounts, reflecting the assumption that young adults with good academic standing are responsible students and drivers.
- Safe Driver Discount - Auto insurance companies also offer savings for drivers with safe driving habits, known as the safe driver discount.
- Defensive Driving Course - Some auto insurance providers offer insurance coverage savings to young drivers who complete an approved defensive driving class, as these can equip drivers with skills that reduce the likelihood of accidents.
- Loyalty Discount - Loyalty to an insurer, insuring multiple cars, or driving fewer miles than average can offer additional price cuts. Some insurers grant reductions for affiliations with specific organizations or for opting for paperless billing and electronic payments through debit or credit cards.
- Good Driver Discount - Drivers with clean driving records, participants in telematics programs monitoring driving habits, or those paying premiums in full rather than in installments might find additional savings.
- Homeowner Discount - Additionally, driving eco-friendly cars or being a homeowner can sometimes lead to further discounts. Calling your insurance agent and routinely comparing rates is always beneficial to ensure optimal savings.
Car insurance rates are based on many factors, including age, gender, and driving history. While drivers under 25 often face higher premiums, numerous strategies exist to secure discounts and reduce costs, regardless of age or experience.
Always consult with an insurance agent and periodically shop around to ensure optimal coverage and savings as the market changes.
Switching Insurance Companies is the Fastest Way to Lower Car Insurance Rates
Switching to a different insurance company is one of the quickest ways to lower your auto insurance. Just like when you reach a milestone birthday or have a ticket removed from your record, switching insurance companies can save you a lot. It’s because underwriting practices differ between insurance companies; what one company considers high risk, another may consider moderate or low risk.
So be sure to get quotes from multiple insurance companies for cheaper rates. When you call different companies, don’t be afraid to ask about discounts like bundling auto with home or renters.
As a rule of thumb, review your car insurance policy and get quotes every 6 months. This way you’ll always be with the company that offers the best price for your coverage.
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