Paul Sanchez
Car insurance for new drivers tends to be expensive because they are considered a higher risk. However, there are ways to lower insurance rates for new drivers. One way is to choose a car with a smaller engine, as larger engines tend to be more powerful and thus more expensive to insure. Another way is to improve one's credit score, as a higher credit score can lead to lower premiums. Shopping around for insurance and comparing quotes from different companies can also help to find the best rates. Additionally, new drivers can take advantage of discounts offered by insurance companies, such as those for good students or for completing a defensive driving course.
| Characteristics | Values |
|---|---|
| Age | Drivers between 16 and 18 years old are deemed riskiest to insure, so insurance rates are highest for this age group. Rates tend to drop as motorists reach adulthood, with premiums decreasing considerably after age 25. |
| Driving experience | New drivers are considered a bigger risk due to their inexperience, which leads to higher insurance rates. Gaining more driving experience over time can help lower premiums. |
| Driving record | Maintaining a clean driving record with no accidents, tickets, or violations can lead to lower insurance rates. Conversely, accidents or violations can cause rates to spike, especially in the first year. |
| Vehicle choice | Choosing a car with a smaller engine is generally cheaper to insure and run. More powerful vehicles are often perceived as higher risk by insurers. |
| Credit score | A strong credit score can help qualify for lower insurance rates, as it demonstrates financial responsibility. Poor credit history may lead to higher premiums. |
| Insurance provider | Shopping around and comparing quotes from multiple insurance providers can help identify the most cost-effective option. |
| Insurance plan | Opting for a higher deductible can lower insurance rates, but it will result in higher out-of-pocket expenses in the event of a claim. Reducing coverage or dropping optional coverages can also lower premiums. |
| Discounts | Seeking discounts offered by insurance companies, such as those for online quoting, paperless billing, or safe driving practices, can help lower overall insurance costs. |
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What You'll Learn
Choose a car with a smaller engine
One of the most effective ways to reduce insurance premiums for new drivers is to choose a car with a smaller engine. Generally, the more powerful a car's engine is, the more expensive it will be to insure, especially for newly qualified drivers. This is because larger engines tend to produce more powerful cars, which insurers perceive as riskier to cover.
Cars with smaller engines, such as 1L or 1.2L, are typically cheaper to insure and are often ranked in lower insurance groups. These groups, ranging from 1 to 50, indicate the risk level associated with insuring a particular vehicle, with group 1 being the cheapest and group 50 the most expensive. Smaller engines also tend to be more fuel-efficient, resulting in lower running costs for the owner.
When deciding on a car, it's worth considering that some smaller cars may be placed in higher insurance groups due to factors beyond engine size. For example, the Renault Clio and Dacia Sandero share the same platform and engine, yet the Clio's stylish design and higher occupant protection result in a higher insurance group rating. Similarly, the SEAT Arona, a small SUV, sits in a lower insurance group than the SEAT Ibiza hatchback, despite being larger and more expensive.
It's important to remember that insurance providers consider various factors beyond engine size when determining premiums, including the car's price, repair costs, safety record, and theft likelihood. Therefore, while opting for a smaller engine can help reduce insurance costs, it is just one factor among many that influence the overall premium.
By choosing a car with a smaller engine, new drivers can benefit from lower insurance premiums and running costs, making it a financially prudent choice. However, it is always advisable to research and compare insurance costs for specific vehicles to make an informed decision.
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Seek out discounts
New drivers, especially teens, are considered high-risk drivers and can be expensive to cover. However, there are methods for securing insurance discounts for new drivers.
State Farm, for example, offers several car insurance discounts for teen drivers. Their Steer Clear program helps young drivers improve their skills behind the wheel by offering on-the-road training, mentoring, and an online course. State Farm also offers a discount of up to 25% for teen drivers who get good grades, and this can last until they turn 25. Similarly, GEICO offers a discount of up to 15% for full-time students with good grades.
If you're a student who resides away from home to attend school full-time, you may be eligible for additional discounts. GEICO, for instance, offers further savings for students in this situation, provided they don't have regular access to a covered vehicle. State Farm also offers a discount for students under 25 who move away to school and only use the family car during school vacations and holidays.
Another way to secure a discount is to bundle your auto coverage with other insurance policies, such as home or renters insurance. GEICO, for instance, offers a multi-policy discount for customers who bundle their auto coverage with other insurance policies.
Finally, some insurance companies offer discounts for safe driving. GEICO, for example, offers lower premiums for safe drivers, rewarding those with a clean driving record. State Farm also offers savings of up to 30% based on how you drive.
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Raise your deductible
Raising your deductible is one of the most impactful ways to lower your car insurance rate. A deductible is the amount you pay out of pocket on a claim before your insurance covers the rest. Typically, the higher the car insurance deductible you are willing to pay, the cheaper the premiums will be, as you are taking on more financial responsibility in the event of a claim. Conversely, a lower deductible means a higher premium because the insurer assumes more financial responsibility.
For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30%. Going to a $1,000 deductible can save you 40% or more. However, before choosing a higher deductible, ensure you have enough money set aside to pay it if you have a claim. Additionally, consider that a higher deductible means you will pay more out of pocket for a claim.
Some insurance companies offer lower rates for multiple vehicles insured with the same company. Therefore, you may save money by bundling your car and home insurance with the same provider. This option provides the convenience of having one policy, one premium, and one deductible for all your covered possessions.
It is also worth noting that some companies offer discounts for features that reduce the risk of injuries or theft. Before purchasing a new or used car, check the insurance costs, as car insurance premiums are based in part on the car's price, the cost to repair it, its overall safety record, and the likelihood of theft.
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Improve your credit score
Improving your credit score is one of the most effective ways to lower your insurance rates as a new driver. A low credit score can drive up your car insurance rate, with drivers with poor credit paying 95-104% more for full coverage car insurance than those with excellent credit. This is because insurers believe that drivers with poor credit are more likely to file claims, making them more expensive to cover.
To improve your credit score, it is recommended to make bill and debt payments on time. Keeping credit card balances low relative to credit limits can also positively impact your credit score, as it reflects good credit utilization habits. Additionally, diversifying your credit by responsibly managing a mix of credit accounts, such as credit cards, loans, and mortgages, can demonstrate your ability to handle different types of credit effectively.
It is worth noting that the impact of your credit score on insurance rates may vary depending on the state you live in. While most states allow insurers to consider credit scores, some states, including California, Hawaii, Massachusetts, and Michigan, have banned or limited the use of credit scores in determining insurance rates. These states base rates primarily on driving records, locations, and other factors.
By improving your credit score, you can significantly reduce your insurance rates and save money. It is a gradual process that requires consistent financial discipline, but it will ultimately make you more financially stable and secure.
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Get added to a family policy
If you're a new driver, one way to potentially lower your insurance rates is to get added to a family policy. This is a common practice for teenagers who have recently obtained their driver's licenses. By being added to a family member's existing insurance policy, you can benefit from their driving experience and potentially lower your insurance costs. Here are some things to keep in mind:
Timing:
In most cases, you should be added to a family policy as soon as you obtain your driver's license. Some insurance companies may even require you to be added when you get your permit. While there may be a grace period to add a new driver, insurance companies can backdate the rate increase to when the license was issued. Therefore, it's important to inform the insurance company promptly to avoid unnecessary costs.
Cost considerations:
Adding a new driver to a family policy will likely increase the overall insurance costs. The increase can range from 70% to 150% of the original rate. However, it is still generally less expensive than purchasing a separate policy for the new driver. Additionally, if the new driver is a teenager, they may qualify for discounts based on their academic performance, with discounts ranging from 5% to 25%.
Vehicle choice:
The type of vehicle driven by the new driver can also impact insurance rates. Instead of adding a new car to the policy, consider sharing an existing car within the household. If there are multiple drivers and cars, the new driver can be assigned as a secondary driver to a vehicle, which is typically cheaper than being listed as the primary driver. It is also recommended to assign the new driver to the least expensive car within the household.
Safety features:
When choosing a vehicle for a new driver, consider one with modern safety features. Not only do safety features provide better protection in the event of an accident, but they can also result in discounts from insurance companies. A family sedan, minivan, or small SUV are typically the vehicles with the best insurance rates for new drivers.
Insurance company requirements:
Different insurance companies may have specific requirements for adding a new driver to a family policy. Most companies will require the new driver to be added if they share the same permanent residence or regularly drive the insured cars. Be sure to contact your insurance company and provide the necessary information, including the new driver's name, date of birth, driving history, license information, and vehicle identification number (VIN) if applicable.
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Frequently asked questions
New drivers are considered a bigger risk due to their inexperience, which is why their insurance rates tend to be high. To lower your insurance rates, you can:
- Improve your credit score.
- Opt for a car with a smaller engine.
- Drive safely and maintain a clean driving record.
- Shop around for the best rates and compare quotes from different insurance companies.
- Increase your deductible.
Insurers use credit-based insurance scores to assess financial responsibility. Drivers with poor credit face higher premiums, whereas those with a strong credit score qualify for lower rates.
The more powerful your car, the more expensive it is to insure. Cars with larger engines are perceived to be riskier and hence command higher insurance rates. Opting for a car with a smaller engine can help lower your insurance rates.
A clean driving record leads to lower insurance premiums. Accidents, tickets, and DUIs can cause your insurance rates to spike, especially in the first year.
Insurance rates vary across companies. By shopping around and comparing quotes from different insurance providers, you can find the best rates and save money.
