If you’re a young driver or if you have any young drivers in your household, you can count on paying higher insurance premiums for several years. Teenagers are the most expensive age group to insure and won’t catch their first break until they get to their early 20s.
There are several other age-related milestones that will affect your insurance rates as you get older. Read on to learn how your car insurance rates are calculated along with some easy tips to maximize your savings on your auto insurance premiums.
How Your Age Affects Your Rates
Your car insurance rates will usually be high between the ages of 16 and 25 but will begin decreasing steadily for each year that you keep a clean driving record. Young drivers can expect to experience their first significant reduction in their car insurance premiums around the age of 20. They will also usually receive another decrease around age 25 and another significant decrease around 35.
Your auto insurance rates will level off around 35, with some slight premium adjustments roughly every decade until you reach 65. Your auto insurance premiums are subject to change in response to the current market conditions, and they’re also impacted by other factors such as your gender, the state you live in, and your driving and insurance claim histories.
Why Are Teenage Drivers so Expensive to Insure?
Being a teenager is already challenging, and there are a lot of responsible and conscientious young men and women who are forced to pay the price for the reckless behavior of their age-mates. But insurance rates are set by actuaries who are paid for their ability to set values on risks.
The way that insurance works is that all of the insured contribute to the company’s assets according to their risk. Young drivers under the age of 25 are far riskier to insure than any other group for numerous reasons.
For starters, younger drivers don’t have as much experience behind the wheel. Practicing driving in an empty parking lot long enough to learn how to pass a short driving test is usually all that it takes to earn a driver’s license, and most experienced drivers will say that it falls way short of preparing young drivers for the hazards of daily driving. Inexperience behind the wheel is one factor that insurance companies consider when setting rates for teens.
There is also an increased likelihood for young people to make bad decisions. One in three teenagers admits to texting while driving, and the actual figure may be significantly higher. Distracted driving is a problem for drivers of all ages, but most young people freely admit to having major smartphone addictions. Regardless, the use of a smartphone while driving is an important factor in determining car insurance rates.
In addition, young drivers engage in risky behavior while driving. Whether it’s being unaccustomed to the responsiveness of the gas pedal or showing off for friends, teenage drivers are also more likely to speed. Young people are also the least likely to consistently use their seatbelts.
Older Drivers Also Pay Higher Premiums
Teenagers aren’t the only ones who are subject to higher car insurance rates because of problems that affect their agemates. After you turn 65, you can expect to experience a rate increase. This is based on the increased likelihood of declining eyesight and delayed reaction times, among other factors.
If you’re still driving at 80, you will experience a very significant rate hike. According to AAA, drivers aged 80 and older have the highest risk of being involved in a fatal crash than any other age group.
The good news is that many leading insurers offer a senior discount or an AARP discount. You can also take defensive driving courses and participate in other programs to lower your insurance premiums. The insurance industry is forced to set their rates based on the actuarial valuation of risk factors, and seniors are statistically more expensive to insure.
Insurance companies consider seniors highly desirable policyholders because of their brand loyalty and decades of driving experience. As a senior with a clean driving record, you can always count on the leading insurers to actively pursue your business and offer you competitive rates.
How Can You Reduce Auto Insurance Premiums?
Insurance companies set their rates on the standard amount of risk for drivers in your age group but offer plenty of ways to help you save money on your premiums. You can start by driving responsibly at all times.
Don’t run red lights, use your blinkers and remember that speeding doesn’t really save you any time. Your lead foot might shave a few minutes off a long road trip, but you’ll lose those minutes and more if you get pulled over. It’s also virtually impossible to make up time by speeding in the city and extremely dangerous.
If you do get a ticket, many communities will allow you to plead no contest to the charge and keep the ticket from being reported to your insurance as long as you don’t get another ticket for a probation period. Some municipalities might require you to take a defensive driving course, which can now be completed online. Before you pay the ticket, be sure to review your options with the court clerk’s office.
Young drivers without any tickets or accidents might qualify for a good student discount. This will usually require the young driver to maintain a GPA of 3.0 or higher. As a parent, you should research the cost of adding your children to your own policy versus purchasing a standalone policy in their name. It’s usually more cost-effective to add your children to your policy, but the drawback is that every insured driver on the policy will share the expense.
Many drivers might be tempted not to file claims after small “fender benders” to save money, but this is often a false economy. Seemingly cosmetic damage can often affect your car’s internal workings in ways that aren’t immediately obvious, and you pay insurance premiums to protect yourself from out-of-pocket losses.
If you never file a claim when you need to, you’ll never enjoy the benefits of paying your insurance premiums. Filing a claim won’t automatically result in a rate increase, and many insurers offer accident forgiveness for policyholders who don’t file additional claims.
Stay in contact with your car insurance provider, and update them about any life changes that might qualify you for discounts. If you get married, both of you become a better risk. And if you have a large family you have more buying power to get a better overall deal for all drivers. You can also stop carrying collision coverage on the vehicles you have paid off and raise your deductible on vehicles you don’t drive as frequently.
Be prepared to shop around frequently. The auto insurance market is very competitive, and this is great news for you as a customer. Most insurers will also show you their competitor’s rates alongside their own even if they’re higher. Don’t feel the pressure to remain loyal to your current insurance company if you can find a better deal.
Regardless of your current age, there are many ways to save on your car insurance if you are willing to take the necessary steps until any age-related rate decrease may take effect.
