Auto Insurance Premiums: Under 25S Pay More

Auto insurance is often more expensive for people under 25 because they are considered to be high-risk drivers. Statistically, younger drivers are more likely to be involved in accidents than older drivers, and insurance companies charge higher premiums to offset the higher costs associated with young drivers' claims. However, this is not always the case, as some insurance companies offer affordable rates for drivers under 25.

Why is auto insurance more expensive for under 25s?

Auto insurance is more expensive for under 25s because they are considered to be high-risk drivers. Statistically, younger drivers are more likely to be involved in road accidents than older drivers due to their lack of experience. According to the Insurance Institute for Highway Safety, drivers aged 16 to 19 are four times more likely to be in a car accident compared to older drivers. This increases the likelihood of insurance companies having to pay out, so they charge higher premiums to younger drivers.

The risk is reflected in the numbers. According to the National Highway Traffic Safety Administration, men aged 21 to 25 are nearly three times more likely to be involved in a fatal car crash than women of the same age. In addition, the highest percentage of drunk drivers in the US is among 21 to 24-year-olds, according to a 2022 study from the NHTSA.

However, age is not the only factor that insurance companies take into account when setting rates. Other factors include marital status, location, vehicle type, driving record, annual mileage, and credit history.

While auto insurance is generally more expensive for under 25s, there are ways to reduce costs. These include shopping around for the best rate, adjusting coverage and deductibles, bundling insurance, and improving one's credit score. Staying on a parent's insurance policy can also help to reduce costs for younger drivers.

How much more do under 25s pay?

Auto insurance rates are generally the highest for drivers under 25, with rates decreasing as drivers gain more experience behind the wheel. A 16-year-old driver pays around $613 per month for full coverage insurance, while a 25-year-old driver pays about half of that for the same coverage. This difference in cost is because younger drivers are considered to be riskier to insure due to their lack of driving experience and propensity for risky driving behaviour.

The exact amount that under 25s pay for auto insurance depends on various factors, including gender, location, vehicle type, driving record, credit history, and coverage level. For example, men tend to pay more for car insurance than women, especially at a younger age. Additionally, drivers in urban areas tend to pay more than those in suburban and rural areas due to higher rates of accidents, theft, and vandalism.

It is worth noting that age is not the only factor that insurance companies consider when determining rates. Other factors, such as driving record, credit score, and claim history, also play a significant role in calculating premiums. However, age is a critical factor, and young drivers can expect to pay higher rates than older drivers, with rates starting to increase again after age 70.

To save money on auto insurance, young drivers can consider the following strategies:

• Shop around for the best rates and compare quotes from multiple companies.
• Take advantage of discounts offered by insurance providers, such as good student discounts and driver training discounts.
• Maintain a clean driving record.
• Improve their credit score.
• Bundle their auto insurance with other types of insurance, such as renters or homeowners insurance.

What are the cheapest insurance companies for under 25s?

Auto insurance is generally more expensive for under-25s, as they are considered to be high-risk drivers. However, there are still some insurance companies that offer cheaper rates for young drivers.

USAA

USAA offers the cheapest car insurance available to all 25-year-old drivers at $48 per month for minimum coverage. However, it is only available to military members, veterans, and their immediate families.

Auto-Owners Insurance

Auto-Owners Insurance is another affordable option, but it is only available in 26 states.

Geico

Geico is a good option for those looking for cheap minimum-coverage car insurance, with average rates of $61 per month or $729 per year. They also have a highly-rated mobile app and a good reputation for customer service.

Travelers

Travelers is a good choice for those seeking full coverage, with average rates of $166 per month or $1,987 per year.

Erie Insurance

Erie Insurance is available in 12 states and Washington, D.C., and offers very affordable rates for 25-year-olds, with an average of about 25% less than the national average for full coverage.

State Farm

State Farm is a well-known company with excellent nationwide popularity and savings opportunities. They offer a usage-based program where good drivers can save up to 30%.

Progressive

Progressive is another company to consider, as rates tend to decrease by about 9% when drivers turn 25.

Nationwide

Nationwide is also worth considering, as their rates are about 18% below average for 25-year-olds. They offer two telematics insurance programs that can provide significant discounts for safe driving.

Other Options

Young drivers might also be able to find cheaper rates from smaller regional companies like Farm Bureau, Auto-Owners, and Country Financial. Additionally, looking into discounts, such as good student discounts, and taking a defensive driving course can help reduce premiums.

How can under 25s save money on auto insurance?

Auto insurance for under-25s tends to be more expensive than for older drivers. This is because younger drivers are considered to be at greater risk of being involved in an accident. However, there are several ways that under-25s can save money on their auto insurance:

Shop Around for Quotes

Comparing quotes from multiple insurance providers is a good way to find the most affordable option. Different insurers will weigh various factors differently, and some offer unique discounts. Shopping around can help under-25s find the insurer that best suits their needs and offers the most competitive rates.

Stay on Your Parent's Policy

If you're under 25 and still living with your parents, consider staying on their insurance policy. Adding a young driver to an existing policy is usually much cheaper than purchasing a separate policy. This approach leverages the parent's longer driving history and potentially higher credit score to secure lower rates.

Take Advantage of Discounts

Insurance companies often offer various discounts that can help reduce premiums. Good student discounts, for example, are available for students who maintain a certain grade point average, typically a B average or higher. Safe driver discounts are also common, rewarding motorists who go multiple years without speeding tickets, DUI violations, or at-fault accidents. Additionally, look for discounts related to vehicle safety features, such as airbags and anti-lock brakes.

Choose a Higher Voluntary Excess

Opting for a higher voluntary excess can lower your premiums. However, it's important to remember that you'll need to pay this increased amount if you need to make a claim.

Drive an Older, Safer Vehicle

The type of car you drive can significantly impact your insurance rates. Generally, high-performance vehicles and sports cars tend to be more expensive to insure. Instead, opt for a safer, more conservative vehicle with good safety ratings. Additionally, consider choosing a car from a lower insurance group, as these vehicles are typically cheaper to insure.

Improve Your Credit Score

In most states, insurance providers can use policyholders' credit scores to help determine their rates. Improving your credit score can positively impact your insurance premiums, as insurers view good credit scores as a sign of lower risk.

Take a Defensive Driving Course

Completing an approved defensive driving course can lead to discounts on your insurance. These courses improve driving skills and risk assessment abilities, making you a safer driver in the eyes of insurers.

How does auto insurance for under 25s vary by state?

Auto insurance for under-25s can vary significantly in cost across different US states. For example, a 20-year-old driver in Michigan may pay up to $7,576 per year for car insurance, whereas in Hawaii, the same policy could cost as little as $1,022.

There are several reasons why auto insurance costs vary by state. Local laws and regulations, population density, accident rates, access to street parking, weather conditions, crime rates, and other factors all play a role in determining insurance rates.

In general, auto insurance for under-25s tends to be more expensive than for older age groups. This is because younger drivers are considered higher-risk due to their lack of driving experience and propensity for risk-taking. The exact cost of insurance for this age group will depend on individual factors such as gender, marital status, driving record, credit history, vehicle type, and annual mileage.

Some states have banned the use of certain factors in setting insurance rates. For example, California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania prohibit the use of gender as a factor, while California, Hawaii, and Massachusetts restrict the use of credit history.

To find cheaper auto insurance for under-25s, it is recommended to shop around and compare quotes from multiple companies, take advantage of any available discounts (such as good student discounts or defensive driving course discounts), and consider bundling insurance policies, such as renters or homeowners insurance with auto insurance.

Frequently asked questions