In the world of car insurance, there are a ton of factors that providers use to judge the risk of insuring a given driver and their vehicle. This can be something as basic as your age or something more specific like your car’s make and model. As such, everyone’s car insurance rates or what they pay on a monthly basis is different, and the averages which they are based on are very loose. The older and more experienced a driver gets, the more their rates will decrease is the standard practice. The question a lot of people have is at what age do we begin to see those premium decreases? The short answer is around the age of 25. But why the quarter-century mark? This post explores everything related to the correlation between auto insurance rates and drivers 25 or older.
What Factors Typically Determine Auto Insurance Rates?
The keyword here is “risk.” Several personal and auto factors tie into your overall risk, which an insurance provider will use to set your rates. This could mean the chances of you filing a claim are higher.
Insurance providers will determine your risk based on:
- Driving record - First and foremost, how is your driving? If your record shows more markups due to collisions, that tells the insurance company that you are more likely to file a claim while holding a policy with them. Cleaner records are proven to result in lower premiums. At the same time, new drivers who have just received their license may not have a driving record yet. This leaves insurance companies with no other option but to assume that their risk is higher than the average driver.
- Place of residence - Something as simple as your zip code can tell insurance providers a lot. If you live in an area with a significant crime rate, this can increase your odds of filing an auto claim for theft or vandalism. That in itself can require additional coverage like comprehensive insurance.
- Car make and model - The car you drive is major in determining how much you will be paying for auto insurance. A sports car will naturally cost more to insure than a sedan. Costs of repairs and mechanical parts are taken into consideration, along with the safety feature rating. Ask yourself how much you spent on your car and how safe it is; those may be key in determining your insurance rates.
- Sex - While some states don’t base their insurance rates on sex or gender, the majority of them do. There are statistics that support this practice -women have been found to get in fewer accidents than men. Because of this, women typically pay lower auto insurance premiums. This is the most personal factor auto insurers use to set premiums. To do so with race or religion would be illegal.
- Age - As the highlight of this post, age is a significant factor in determining auto insurance rates. Age often signifies a driver’s experience. These drivers, age 25 and younger, are drivers with the highest insurance out of anyone. This piece focuses on how much insurance rates will drop by the time the driver turns 25. The results may surprise you.
- Credit - You have a credit score for your insurance which is based on how likely you are to file a claim. Note that this is not the same credit score that reflects delinquency or with a card company. However, some states do look at traditional credit card scores, so it helps to always pay your bills on time as you do with your insurance premiums.
Why Are Car Insurance Premiums so High For Drivers Under 25?
It’s typical that when a teen prepares for their driving certification test, their parents prepare for a hike in insurance rates. As previously stated, new drivers are subject to the highest auto rates due to their lack of driving history or record. This can even apply to drivers over 25 who never took their driving test and got their license. Even so, a new older driver will still have slightly lower rates than new younger drivers, especially those under 25.
This is also based on statistics and facts. The Insurance Information Institute did a study in 2018 that found that drivers aged 16-20 died in more traffic fatalities than any other age group. This is largely due to inexperience, alcohol consumption, unworn seatbelts, speeding, and texting while driving. During the same year, the National Highway Traffic Safety Administration reported that 2,121 fatalities related to teen drivers.
How Much Does Car Insurance Cost For Those Under 25?
The average cost for insurance varies across the board. It depends on the state and how much coverage the policyholder buys. For the sake of simplicity, we’ll talk about basic coverage, which nearly every state requires its drivers to carry. The average annual rate for car insurance is anywhere from $1,300 to $1,800. That is around $144-$138 a month. This assumes that the driver has been licensed for a considerable amount of time and has a tangible driving record with little to no markups.
Now, let’s look at the numbers associated with teen drivers. Let’s say that an 18-year-old driver is insured with basic coverage. The monthly rate for a driver that young would be around $598 for an annual premium of $7,179. Already, you can see how this age group is considered to be the most expensive to insure. At age 19, the young driver will then see an annual premium of $6,021 -given that they practice safe driving and file no claims within that year. At 20, the premium decreases by 11% to about $5,333. If no claims are filed, or accidents are reported, then by the age of 25, the driver will have their annual premium set to $3,207. This is the average rate for drivers 25 and older.
Do Drivers Under 25 Have Basic or Full Car Insurance?
Firstly, basic car insurance coverage refers to having only the liability coverage your state requires. 48 out of 50 states have their own coverage limits for how much their drivers should carry. This auto coverage pays for injuries you cause to another driver while out on the road -a pretty legal practice. Full car insurance refers to the addition of a collision and comprehensive policy. Collision covers damage to your own car while comprehensive does the same, but only when the car isn’t being used. In the case of an average driver, full insurance costs up to $200 a month or a $2,399 annual premium -at least $700 more than a standard coverage. From that alone, you may have an idea how expensive it can be for new drivers under 25. Because of this, many new drivers hold off full coverage until they have a couple more years of driving experience.
How Does Car Insurance For Young Males And Females 25 And Under Differ by Year?
As previously mentioned, women pay less for car insurance than men because they are seen as less risky to insure. This is backed up by statistics wherein men are more likely to get involved in an auto collision. Now that we’ve seen the difference in rates an average driver would pay in comparison to a new driver under 25, let’s talk about how those drivers under 25 compare to each other based on sex.
Let’s take a look at the different younger age groups and see how the two sexes measure up in terms of rates:
- 18-years-old - The average insurance rate for men of 18 years is $7,561, while women see rates of $6,797 annually.
- 19-years-old - The average annual rate for 19-year-old men is $6,021, while women see annual rates of around $5,661.
- 20-years-old - The annual rate found among 20-year-old men is $5,590, while women have rates around $5,079.
- 21-years-old - By the time they turn the drinking age, men can pay annual insurance rates up to $4,980 while women pay up to $4,121.
- 22-years-old - Men of 22 years pay an annual rate of up to $4,243 for their car insurance, while women pay around $3,923
- 23-years-old - The annual rate for 23-year-old men is $3,965, while 23-year-old women have a premium of $3,716.
- 24-years-old - The yearly premium for 24-year-old men is $3,702, with women of the same age having a rate of $3,493.
- 25-years-old - By the age of 25, both male and female-orientated rates are closer in value, with men paying $3,247 and women paying $3,167.
How Much Exactly Will Insurance Drop When a Driver Turns 25?
By now, you’ve seen that if all goes right and safe driving is practiced, a driver turning 25 can see their insurance rates decrease by nearly $5,000 over the years. Within three years, auto insurance rates can decrease as much as $700 dollars. At the same time, you’ve probably noticed how the larger premium decreases are when the driver is younger. Around the time they turn 21, the rates do continue to decrease but in smaller amounts. An example would be the 17% decrease from $5,333 to $4,453 when a driver turns 21 in comparison to the 7% decrease from $4,128 to $3,840 when a driver turns 23.
What Are Reasons Why Car Insurance Premiums Don’t Change or Increase?
There are also a number of reasons why your car insurance premiums don’t decrease by the time you turn 25. For the most part, a lot of the reasons are the opposite of the previously mentioned reasons for a rate decrease.
Reasons why your rates don’t decrease:
- Driver experience - Naturally, if you received your driver’s license at the age of 18 instead of 16, your rates as a 25-year-old won’t be as low as someone who got certified at 16.
- Driving history - If you received something as minor as a traffic ticket or something as major as a collision claim, there is more than likely going to be a markup on your driving history. When your insurance provider sees them, they may increase your rates.
- Credit history - A low credit score or delinquent payments can be noted by your insurance provider if the state allows it. Falling behind on your bills can result in insurance rates increasing or remaining the same.
- Location - Your zip code and location not only determine your insurance rates but can also set your rates seriously high due to local criminal activity. While your insurance rates may decrease, they may not be by much.
What Can You do to Decrease Your Auto Insurance Premium?
The best part of any guide is the tips and tricks, and this is the time when they are offered. Perhaps you want to know about some other ways to decrease your auto insurance rates that aren’t the passage of time.
Here are some ways to save on auto rates for young or new drivers:
- Purchase basic coverage - In other words, don’t spend too much money on policy add-ons. You should only buy comprehensive and collision if your vehicle has a high value; otherwise, it won’t be worth it.
- Have name on another’s insurance policy - The question is who’s policy would that be? Typically, young drivers are listed on their parents’ policy which is much cheaper than opening their own. Another way it can go is that younger spouses share a policy.
- Good driver or student discounts - There are a few insurance providers where young drivers can earn discounts based on their safe driving habits and education. The way to find these providers is to shop around and ask about their safe driver discounts.
- Shop around for insurance deals - Relating to the previous tip about discounts, the best way to find insurance deals is to shop around local and national names for the lowest rates for new drivers under 25. You’ll find that a big provider like Allstate charges $5,074 for a new driver, while smaller providers offer premiums as low as $3,542.
- Being accident-free - The best way to get a good driver discount is to steer clear of accidents. That is the most direct evidence of safe driving that compels insurance providers to provide incentives.
- Installing a telematics system - Having a telematics system installed on your vehicle allows your insurance company to track your driving habits, which can directly lead to a decrease in rates.
- Taking a defensive driving course - Insurance rates can be reduced by up to 20% if the driver attends a defensive driving course. This may uniquely apply to drivers under 25 or seniors. A defensive course certificate shows your insurance providers that you are actively trying to become a safer driver.
- Drive infrequently - The more anyone drives, than more likely they are to get into an accident and thus riskier to insure. Drivers who don’t put too many miles on their vehicles receive lower rates for their infrequent driving. If you don’t drive regularly, then pay-per-mile insurance will be more cost-effective than a standard auto policy.
- Bundle insurance coverage - Purchasing homeowners’ or renters’ insurance along with your auto insurance from the same provider can lead to them providing bundling discounts up to 25%.
- E-payments - Electronic payment processing through an insurance company’s app can lead to efficiency and discounts up to 10%.
- Safety measures - Another factor that plays into determining insurance rates is the safety features of a vehicle. Insurance providers regularly give discounts based on how many safety features like auto brakes a car has.
Where Should You go For The Best Auto Insurance Premiums For Drivers Under 25?
Nine major insurance providers have been named the best for new drivers under 25 -Progressive, Liberty Mutual, Allstate, Metromile, Esurance, Travelers, USAA, State Farm, and Geico. But sometimes, the best rates come from the smaller, localized names. Referring to the previous section, shop around for new driver insurance. Auto insurance requires some comparing and contrasting as providers everywhere price their policies differently. Insurance Navy provides excellent rates and coverage for all drivers. Get an auto insurance quote online or visit one of our convenient locations nationwide.