Finding Affordable Auto Insurance As A New Driver

New drivers are often considered high-risk by insurance companies due to their lack of driving experience and are therefore charged higher insurance rates. However, there are ways for new drivers to save on insurance coverage. Comparing quotes from multiple insurance companies is a good way to find the best rates, and staying on a parent's insurance policy can also help young drivers save money. Choosing a moderately priced vehicle, selecting a high deductible, and taking advantage of discounts are other strategies that can help lower insurance costs for new drivers.

Compare quotes from multiple insurance companies

Comparing quotes from multiple insurance companies is the best way to find the cheapest car insurance for new drivers. Prices vary significantly from company to company, so it's important to shop around and get quotes from at least three insurers to find the most affordable option.

• Decide on the coverage you need: Most states require drivers to carry a minimum amount of liability coverage. Consider your state's minimum coverage requirements and decide if you need additional coverage based on your car's mileage, features, and age.
• View rate comparisons: Compare rates from different insurers to find the companies with the lowest rates overall and for specific driver groups, such as teen or senior drivers. Keep in mind that rates may vary based on factors such as your driving record, annual mileage, and the level of coverage you're seeking.
• Research individual insurers: Look into the reputation and customer service of different insurance companies. Check reviews, claims handling processes, and customer satisfaction ratings to get an idea of the quality of their services.
• Gather personal information: To get accurate quotes, be prepared to provide basic information about yourself, such as age, gender, marital status, driving history, vehicle information (make, model, VIN), and current insurance status.
• Use comparison tools and websites: Utilize online comparison tools and websites to efficiently compare quotes from multiple insurers at once. These tools will require you to input your information once and will provide you with personalized quotes from different companies.
• Compare quotes regularly: Insurance rates can change over time, so it's a good idea to compare quotes regularly, especially when your policy is up for renewal. This will help you stay on top of the best deals and ensure you're getting the most affordable option.

Improve your credit score

Improving your credit score is an important aspect of managing your finances effectively. A higher credit score can unlock benefits such as loan approvals, better interest rates, and increased credit limits. Here are some detailed strategies to help you enhance your credit score:

Pay your bills on time

Timely payment of your bills is crucial for shaping your credit-based insurance score. A pattern of late payments or credit delinquencies may indicate a higher risk of claim submissions to insurance companies. By consistently paying your bills on or before their due dates, you can positively impact your credit and insurance scores.

Keep hard credit inquiries to a minimum

It's important to distinguish between hard and soft credit inquiries. Hard inquiries occur when you apply for a line of credit, while soft inquiries, such as insurance companies reviewing your credit during the quoting process, do not impact your score. Too many hard inquiries can negatively affect your score, so consider waiting to apply for loans or new credit lines if you're trying to build your credit.

Monitor your score regularly

Regularly checking your credit score has multiple benefits. It enables you to take proactive measures to improve and allows you to spot errors or signs of identity theft early on. Monitoring your score also helps you address and rectify any inaccuracies promptly.

Maintain old lines of credit

Keeping long-standing credit accounts can positively impact your credit score. The duration of your credit history is a significant factor, contributing 15 to 20 percent to your score. Instead of closing unused credit cards, consider using them sparingly and making timely payments to fortify your credit history and lower your credit utilization ratio.

Be mindful of your credit utilization ratio

Your credit utilization ratio measures the amount of credit you're using relative to your total available credit. While there's no set rule, experts recommend utilizing no more than 30 percent of your available credit at any given time. Paying off some of your debt to lower your credit utilization score can help improve your overall credit score and, consequently, your credit-based insurance score.

Look for discounts

Discounts are readily available in the auto insurance world. Many are subject to state and insurer restrictions. Here are some common discounts:

Multi-Policy Discounts

You can become eligible for a multi-policy discount by carrying multiple policies with one insurance provider. Common policy combinations are home-and-auto or renters-and-auto. These discounts may be applied to both policies. The discount you receive may vary depending on your coverage combination. For example, you'll receive more of a discount for bundling homeowners and auto policies than by adding a renters insurance policy to your auto coverage. The logic is simple: a homeowners policy brings in more revenue for an insurance company than does renters insurance.

Multi-Car Discounts

Similar to a multi-policy discount, a multi-car discount refers to insuring more than one car with a single company. The discount is automatically added either at policy inception—if two cars were insured from the start—or upon the addition of a second vehicle to the policy.

Defensive Driving Discount

This discount entails taking a defensive driving course and presenting your insurance company with proof in the form of a receipt or transcript. The logic behind this discount is clear: defensive driving classes make you a safer driver, which makes you less risky, i.e., cheaper, to insure.

Anti-Theft Device Discount

If your car comes with an anti-theft device—or if you utilize a service like Lojack—your insurance company may throw in a discount. The discount tends to be smaller than a multi-policy or defensive driver bonus, but every little bit helps. Anti-theft devices are commonly built into modern vehicles. Just be sure any security devices are taken into account when your quote is generated.

Good Driver Discount

This discount is available if you have a clean driving record—meaning no at-fault accidents or citations. Safe drivers can expect this valuable discount to be added to your policy when your Motor Vehicle Report (MVR) is pulled at the inception of your policy. If you're convinced that you practice safe driving habits and are not receiving a discount, contact your insurance company and inquire about a good driver discount.

Profession/Occupation Discount

This discount goes by several names, but the idea is simple. Some insurance companies will give you a discount based on your occupation. Statistically, occupations such as teachers, physicians, or police officers are less likely to file a claim. An insurer will typically require proof of profession—a photocopy of your degree is a common request.

Good Student Discount

If you're younger than 25 and have good grades—typically a B average (3.0 GPA) or better—speak with your insurance company about a good student discount. Normally, they’ll ask for a transcript every six to 12 months as proof of your continued good standing.

Adjust your car insurance coverage

Adjusting your car insurance coverage is one of the ways to save on car insurance as a new driver. Here are some ways to do that:

Opt for a Higher Deductible

You can opt for a higher deductible, which will usually lead to lower insurance premiums. However, this means that you will have to pay more upfront if you file an insurance claim.

Drop Unnecessary Coverage

If you own an older vehicle outright, you may not need collision insurance or comprehensive coverage. In most states, you will still be required to have liability insurance if you decide to drop the rest of your full-coverage policy.

Try Usage-Based Insurance

Usage-based insurance, also known as pay-per-mile insurance, measures driving behaviour and mileage and uses this data to set rates. This type of insurance is usually cheaper for customers with good driving habits, according to the National Association of Insurance Commissioners (NAIC). However, it may not be available in every state, and it may not be a good option for those with long commutes or poor driving habits.

Try usage-based insurance

Usage-based insurance (UBI) is a great way to save money on car insurance, especially for new drivers. UBI helps align your auto policy's cost with your driving habits. While auto insurers have traditionally used factors such as your age, location, and motor vehicle report in determining your risk for an accident, UBI helps calculate your rate for auto insurance by analyzing how often and how safely you drive.

UBI is a newer type of auto insurance that looks at additional factors, like how many miles you drive or how safe a driver you are, to determine your auto insurance premium. If you typically drive short distances or stick to the speed limit, for example, you might find you qualify for a lower premium with UBI versus traditional auto insurance.

There are two basic types of UBI programs:

• Driving-based: Your driving habits are measured based on factors like how hard and how often you brake, how quickly you accelerate, and the time of day you drive.
• Mileage-based: Your insurer only measures how many miles you drive.

Both programs rely on telematics to gather information about your driving behavior. Telematics can transmit data from moving vehicles and share it with an information center. This data is then used to calculate a driving score and determine your discount—if you qualify for one.

UBI is a good choice if you're confident in your ability to drive safely and stay off your phone. Safe drivers can save between 10% and 40% on their car insurance, depending on the company they choose.

If you're a new driver, UBI can be especially beneficial as it allows you to build a good track record as a driver, which leads to lower insurance premiums over time. With UBI, you can prove right from the start that you're a safe driver and maintain those good habits to keep getting long-term savings on your auto insurance.

Some popular UBI programs offered by insurance companies include:

• State Farm Drive Safe & Save
• Nationwide SmartRide
• Liberty Mutual RightTrack
• Progressive Snapshot
• Geico DriveEasy
• Allstate Drivewise
• Esurance DriveSense
• Metromile
• Travelers IntelliDrive

Frequently asked questions