Auto Insurance Premiums: The Cost Of Adding Drivers

There are several reasons why adding more people to your auto insurance policy may result in a higher premium. Firstly, insurance companies perceive additional drivers as an increased risk, especially if they are young or have a poor driving record. Secondly, the location of the additional drivers matters; if they live in an area with a high rate of accidents, theft, or weather-related claims, the premium will likely increase. Moreover, the personal demographics and driving history of the new drivers are taken into account. Factors such as age and gender, as well as accidents and traffic violations, can all contribute to a higher premium. Finally, insurance companies also consider the make and model of the insured vehicle, as certain cars are more expensive to repair or replace.

Adding a new driver

When to Add a Driver to Your Auto Insurance Policy

You should add any licensed driver who lives in your household and has access to your vehicle to your insurance policy. For example, you may include the following household members on your auto policy:

• A partner who moves in
• Teenage children who obtain their driver's licenses
• College-aged children who drive your vehicle when they return home for the holidays

Some states may allow you to exclude a driver from being covered by the policy.

How to Add a Driver to Your Insurance Policy

Most major auto insurance providers let you add a driver to your policy by calling the company and speaking to an insurance agent, or via the insurer's website or mobile app. The insurance company will typically need the following information about the additional driver:

• Their name, date of birth, and license information
• Their driving history, including the number of years they've held a license and details of any accidents and traffic violations
• Their vehicle identification number (VIN) if you also plan to share one policy that covers both of your vehicles
• Their marital status and Social Security number
• Their address if they don't live with you
• Whether they need an SR-22 financial responsibility certificate
• Any information that may help you secure a discount, such as details of a defensive driving course they've taken or their grade point average

Cost of Adding a Driver to an Insurance Policy

The cost of adding a driver to your car insurance or sharing a policy varies based on factors like the driver's age and their motor vehicle record. Your premiums may become more expensive if you add an inexperienced driver or one with a poor driving history to your policy, as they are high-risk motorists. However, your premiums may become cheaper if you include a more experienced driver who has a clean driving record, as they are a low risk to the insurer.

Other Things to Consider

Some insurance companies require married couples who live together to be on the same policy. If you don't live with the person you're adding to your policy, but they drive your car regularly, you should still add them.

Accident history

The impact of an accident on insurance premiums depends on factors such as the type of accident, the driver's state and insurer, and the number of years since the accident. Most claims stay on a driving record for three years, and insurance companies typically look back at several years of driving history when calculating rates. The more time that has passed since an accident, the less bearing it has on future premiums. Some insurers offer accident forgiveness programs, waiving rate increases for certain types of accidents, such as a driver's first accident or minor accidents.

In addition to accident history, insurance companies consider other factors, such as driving violations, claims history, and personal demographics like age and gender. These factors collectively contribute to assessing the risk associated with insuring a driver, which then determines the premium amount.

Credit score

In states where it is allowed, insurance companies might consider a credit-based insurance score when reviewing your application or setting your premiums. This score is designed to predict the statistical likelihood that you will file insurance claims that cost the company more than it collects in premiums.

Favorable credit factors that could result in lower insurance premiums include:

• A long-established credit history
• Numerous open accounts in good standing
• No late payments or past-due accounts
• Low use of available credit

Unfavorable credit factors that could result in higher insurance premiums include:

• Numerous past-due payments
• High use of available credit
• Numerous recent applications for credit

You can improve your credit score by:

• Making on-time payments
• Paying down debts
• Using revolving and instalment credit
• Applying sparingly for new credit

Vehicle type

The type of vehicle you drive has a significant impact on the cost of car insurance. Insurance companies consider the average cost of claims for different types of vehicles when setting rates.

Luxury vehicles with new technology and advanced safety features typically cost more to insure because they are more expensive to repair or replace. So, a newer, more expensive vehicle with many features will cost more to insure than an older base-model vehicle with high mileage.

The make and model of the vehicle also matter. For example, according to Quadrant Information Services, Dodge has the highest car insurance costs on average, while Mazda has the lowest.

Sports cars are considered a higher risk than minivans, so they usually have more expensive insurance policies. The age of the vehicle is also a factor, with older cars generally having lower insurance premiums.

Area

For example, a study by CarInsurance.com found that a 40-year-old man with a 2012 Honda Accord and a clean driving record would pay $730 per year in Bullhead City, Arizona, but his premium would jump to $1,280 per year if he moved to nearby Laughlin, Nevada. This difference in pricing is solely due to the change in location, demonstrating the impact of geographical factors on insurance rates.

Additionally, insurance rates can be influenced by state-level factors. For instance, some states, like California, prohibit insurers from using credit scores when setting rates, which can affect premiums for individuals with lower credit scores.

Furthermore, natural disasters, such as hurricanes, wildfires, and hail storms, can drive up insurance costs in certain regions. These disasters, sometimes fuelled by climate change, contribute to higher insurance premiums, even in areas not typically associated with these events. For example, Minnesota's Insurance Commissioner, Grace Arnold, mentions that the state consistently experiences billion-dollar storms, leading to higher insurance costs.

In conclusion, the area where a vehicle is kept and operated significantly impacts auto insurance premiums. Insurance companies consider factors such as theft rates, accident history, weather-related claims, and the occurrence of natural disasters when calculating rates for specific locations. These geographical factors can result in notable differences in insurance premiums, even for neighbouring areas.

Frequently asked questions