New Drivers: The Auto Insurance Conundrum

New Drivers and Auto Insurance: What You Need to Know

New drivers often face higher auto insurance costs than more experienced drivers. This is due to a range of factors, including their lack of a driving record, their age, and their increased likelihood of being in an accident. However, there are ways for new drivers to mitigate these costs and find more affordable policies.

Why new drivers pay more for auto insurance

New drivers tend to pay more for auto insurance than more experienced drivers. This is because insurance companies consider anyone without a recent driving record or insurance policy to be a risky customer. The precise definition of a "new driver" varies between insurance companies, but it typically refers to anyone who has less than three years of driving experience.

Risk factors

Insurance companies view younger drivers as a higher risk because of their shorter driving history and inexperience. Data shows that teen and young adult drivers have a higher rate of auto accidents as well as higher rates of distracted and impaired driving. More accidents mean more payouts for insurance providers, which is why they charge teens higher insurance rates.

Gender

Insurance companies also take gender into account when setting insurance rates. Teenage boys have a much higher risk of auto accidents than adolescent girls, so they pay much higher auto insurance rates. A 17-year-old male pays about 196% more than a 25-year-old male would for a similar policy.

Location

The location of the driver also affects insurance rates. For example, in Michigan, auto no-fault premiums increase by 57% when teen drivers are added to their parents' policies, whereas nationally, rates increase by 80%. In some states, such as New Hampshire, insurance premiums increase by as much as 115%.

Discounts

There are ways for new drivers to reduce their insurance rates. Many auto insurers offer discounts for new drivers, including good student discounts, discounts for young drivers who take a defensive driving course, and multipolicy discounts if the driver also has renters or homeowners insurance.

How to save on auto insurance as a new driver

New drivers are considered a higher risk by insurance companies due to their shorter driving history and inexperience. As a result, they often pay more for auto insurance. However, there are several ways to save on auto insurance as a new driver.

Get multiple quotes

Shop around and get quotes from different insurance companies to find the best rates. Compare car insurance companies and look for ones that offer the most affordable new-driver policies.

Look for discounts

Ask about new-driver discounts, such as safe driver, good student, and defensive driver course discounts. If you're a student, you may be eligible for discounts if you maintain a certain GPA. If you're already working, you may qualify for occupation or company discounts, depending on your profession.

Stay on your parents' policy

If you're a teen or young adult, consider staying on your parent's auto insurance policy. You can benefit from their driving history, insurance claims history, and credit score, which can result in significant savings compared to having your own policy.

Choose the right vehicle

Opt for an affordable, safe car that's a few years old rather than a new or luxury vehicle. Older cars are generally cheaper to insure, and safety features can help lower your premium.

Choose the right coverage and provider

If you have an older car, you may only need the minimum amount of auto insurance required in your state. Research insurance companies that offer affordable new-driver policies, and choose a provider that suits your needs.

Improve your credit score

Building a good credit score can positively impact your auto insurance rates. Paying your bills on time and building good credit can help lower your premium.

Bundle your insurance

If you're no longer living with your parents, consider bundling your homeowner's or renter's insurance policy with your auto insurance. Some companies offer multi-policy discounts, which can help you save on your overall insurance costs.

Choose a higher deductible

Selecting a higher deductible can lower your monthly premium. Just make sure you're comfortable with the amount you choose, as this is what you'll need to pay out of pocket if you're in an accident.

Take a defensive driving course

Many insurance companies offer discounts for completing a defensive driving course. This can help improve your driving skills and make you eligible for lower insurance rates.

Pay attention to billing methods

Paying your auto insurance through electronic funds transfer (EFT) or automated clearing house (ACH) can eliminate billing fees and save you money.

Enroll in telematics

Telematics programs monitor your driving habits and can offer discounts for cautious or low-mileage drivers. This can be a great way to save money if you don't drive often or have safe driving habits.

Auto insurance for new drivers in Michigan

As a new driver in Michigan, you'll be facing higher insurance costs than more experienced drivers. This is because insurance companies view younger drivers as a higher risk due to their shorter driving history and lack of experience. However, there are ways to keep these costs down.

Michigan's Auto Insurance Law

In 2020, Michigan introduced a new auto insurance law that gave drivers more choices and lower-cost insurance options. This law also strengthened consumer protections and maintained the highest coverage options in the country. As a result, there has never been a better time for new drivers in Michigan to shop for auto insurance.

Choosing Coverage

When it comes to choosing coverage, new drivers in Michigan have a few options. They can opt for the state's minimum liability coverage, which is the cheapest option, or they can choose a more comprehensive policy that includes collision and comprehensive coverage. While the former is the most affordable option, the latter will provide greater protection in the event of an accident.

Saving Money on Auto Insurance

There are several ways that new drivers in Michigan can save money on their auto insurance:

• Compare insurance companies: Getting quotes from multiple insurance companies and comparing their rates is a great way to find the most affordable coverage.
• Improve your credit score: Building good credit can help lower your insurance rates, as those with poor credit scores tend to pay higher premiums.
• Look for discounts: Many insurance companies offer discounts for young drivers, such as good student discounts and safe driver discounts. Bundling policies, such as homeowners and auto insurance, can also lower your premium.
• Adjust your coverage: Opting for a higher deductible can lower your monthly premium, but it's important to make sure you can afford the out-of-pocket costs if you need to file a claim.
• Usage-based insurance: Also known as pay-per-mile insurance, this type of coverage measures driving behaviour and mileage to set rates. It can be a more affordable option for new drivers who drive safely and infrequently.

Cheapest Car Insurance Companies in Michigan

According to recent data, the cheapest car insurance companies in Michigan for full-coverage protection are:

• USAA
• Progressive
• Auto-Owners Insurance
• Michigan Farm Bureau
• Frankenmuth Insurance

For minimum liability coverage, USAA also offers the cheapest rates, followed by Progressive.

Average Cost of Car Insurance for New Drivers in Michigan

The average cost of car insurance for new drivers in Michigan can vary depending on age, driving history, and other factors. However, based on full-coverage rate estimates, the average cost is around $5,055 per year or $421 per month. For teenage and young drivers, the average cost is even higher, ranging from $2,000 to $6,000 per year or more.

How to get cheap auto insurance as a young driver

Young drivers are considered a higher risk by insurance companies due to their lack of driving experience, and subsequently face higher insurance premiums. However, there are a number of ways to reduce the cost of auto insurance for young drivers:

• Stay on a parent's insurance policy: Young drivers can save thousands of dollars per year by remaining on their parent's insurance policy. This is because the parents' insurance background, credit score and driving history may lead to lower rates than the new driver would find on their own.
• Shop around for quotes: Different insurance companies will offer different rates, so it's worth getting multiple quotes to compare.
• Choose a moderately priced vehicle: The value of a vehicle contributes to insurance rates. Luxury vehicles, like a Mercedes-Benz, will have higher insurance premiums. A good option for young drivers is to buy an older vehicle with good safety features.
• Choose a high deductible: Opting for a high deductible will lower insurance premiums. However, this means a driver will have to pay more if they get into an accident.
• Ask about discounts: There are many discounts available that can help reduce insurance costs, such as multi-policy discounts, multi-car discounts, defensive driving discounts, good student discounts, and safe driver discounts.
• Use technology: Adopting specific technology, such as a telematics app or device, can generate valuable data about driving habits and lead to cheaper rates.

How to get auto insurance after a lapse in coverage

New drivers typically pay more for car insurance than experienced drivers due to their lack of a driving record. However, there are ways to reduce costs, such as comparing rates between providers and looking for discounts.

If you have a lapse in car insurance coverage, you may face higher premiums, a driver's license suspension, tickets, or a lack of coverage in the event of an accident. Here are the steps you can take to get auto insurance after a lapse:

• Contact your provider: Get in touch with your car insurance provider to understand your situation and find out if your policy can be reinstated.
• Reinstate your policy: If your provider is willing, reinstating your auto insurance policy is the best course of action. However, this may depend on the reason for the lapse.
• Compare car insurance quotes: If reinstatement is not an option, compare car insurance quotes from different providers to find the most affordable rates and suitable coverage for your needs.

Frequently asked questions