Young drivers usually pay more for car insurance than more-experienced drivers. Often, rates decrease by the time they reach age 25. But age is not the only factor auto insurance providers use when setting drivers’ insurance rates. Even before reaching 25, young drivers can employ other methods to reduce their rates, such as taking a driver training course and maintaining good academic grades. Knowing what’s available to you can help you lessen your auto insurance bill.
The Age When Car Insurance Prices Go Down
Underwriting and car insurance pricing procedures vary by insurer. Providers determine a driver’s rate by how likely they are to file a claim based on a number of factors. Drivers who pose a high risk of filing a claim pay higher premiums, while drivers who pose a low risk enjoy lower rates.
Risk Categories
Typically, carriers place policyholders in one of three risk categories:
Preferred: Insurers offer preferred rates to drivers who are least likely to file a claim. Typically, drivers in this category have not filed a claim or received a traffic citation in the past three to five years, earning them the lowest available rates.Standard: Standard rates are higher than preferred rates and are offered to drivers who pose moderate risk of filing a claim. Usually, providers offer standard rates to people who drive family-style automobiles and have relatively good driving records.Nonstandard: Carriers charge higher, nonstandard rates to drivers they consider high risk. Generally, insurers charge nonstandard rates to drivers under age 25 because they do not have as much driving experience as older drivers. Drivers who have accident citations, driving-under-the-influence convictions, and speeding tickets on their driving records might also have to pay nonstandard rates.
Drivers Under 25
Generally, male drivers under age 25 pay the highest rates, however, drivers who maintain good driving records can experience premium decreases between ages 17 and 29. Insurers often eliminate youthful driver surcharges when a policyholder turns 25. Age is not the only factor insurance companies use when determining your auto insurance rate. For example, if you maintain a good driving record up to age 25 but have poor credit, you may continue to pay high insurance premiums.
How Insurance Companies Determine Rates
Insurers determine a driver’s risk category during the underwriting process. The process uses algorithms, which analyze your claims history and personal information to determine a rate within your assigned category. Factors used in determining your premium can include your:
AgeAnnual mileageClaims historyCoverages and deductiblesCredit history and ratingDriving experienceDriving recordGenderLocationMarital statusVehicle type
Sometimes, providers offer more favorable rates to drivers who enroll in usage-based insurance programs. These programs base rates on your driving habits, such as the time of day you drive, the number of miles you drive, and how well you avoid hard stops.
How To Get a Lower Price on Car Insurance
If you’re paying high car insurance rates, you can take several steps to reduce costs.
Shop around: Rates can vary widely by insurer. Get rates from several insurance companies, comparing coverages and premiums. If you’re shopping for a new car, always get rates before you buy, because some vehicles cost more to insure than others. Drop unnecessary coverage: If you’ve paid off your car loan, consider dropping collision and comprehensive coverages. However, when you discontinue these coverages, you’ll have to pay out of pocket if a thief steals your vehicle or you total it in an accident. Increase deductibles: If you carry collision and comprehensive coverages, consider increasing your deductibles. While you’ll pay more out of pocket if you file a claim, you’ll save on premiums. Take advantage of discounts: Discounts can greatly reduce your auto insurance rate. Many insurers offer safety and security discounts for vehicles equipped with airbags, anti-lock brakes, and anti-theft systems. Young drivers may also qualify for driver training discounts and good-student discounts when they maintain good grades. Trade in your automobile: Some cars cost more to insure. For instance, a convertible usually costs more to insure than a more modest sedan. Improve your credit: Many states allow insurance companies to use credit ratings when determining your insurance rate. Improving your credit rating can help reduce your premiums in the future.
Shop Around if Premiums Cost Too Much
Shopping around is one of the best ways to reduce your auto insurance rate. Since many insurers offer online quotes, it’s easy to obtain several rate quotes in one sitting. Getting the lowest rate shouldn’t be your only goal; you also need to find all the coverages you need, provided by a reputable and financially stable carrier. For the best results, follow these guidelines:
Make sure an insurer has a license to sell insurance in your state. The National Association of Insurance Commissioners provides a license lookup tool on its website. If an insurer has affiliate companies, ask an agent which company will provide your coverage. When speaking with an agent, ask questions about how your driving history, credit history, and the type of vehicle you own will affect your premiums. Ask agents about discounts. Inquire about dividend and usage-based insurance programs. Find out if the insurance company charges higher premiums or fees for monthly installment plans.
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