How does age affect auto insurance rates?
Fact-checked with HomeInsurance.com
If you’re the parent of a soon-to-be teen driver or a young adult buying your first car insurance policy, take a deep breath and get ready for a costly premium.
Insurance companies don’t like risk and use auto accident statistics to set premiums. That means the youngest and oldest drivers will pay more, even if they follow safe driving habits.
You can’t assume your rates will go down over time. Factors such as your driving record and credit history also impact your insurance rate.
Once you know how insurance companies set your rates, you can avoid premium increases and set your sights on affordable coverage well into the future.
How are auto insurance rates determined?
Insurers apply many factors when determining your car insurance rate, including:
- Amount of coverage: The amount of coverage you need impacts your insurance rate. Financed vehicles cost more to insure because lenders require borrowers to purchase full coverage, including liability, collision and comprehensive policies. If you own your car outright, you may want to consider dropping collision and comprehensive coverages to lower your premium.
- Make and model of your vehicle: Luxury and sports vehicles incur higher insurance premiums because they cost more to repair and replace.
- Your annual mileage: Insurance providers like to insure drivers who pose the lowest claims risk. The more you drive, the more likely you’ll have an accident. Drivers who like to live behind the wheel typically pay higher insurance rates.
- Your credit score: Statistically, folks with low credit scores file more insurance claims than drivers with good credit. Because most states allow insurers to consider credit scoring, chances are your credit history will play a role in your car insurance rate.
- Your driving record: If you rack up a few traffic violations and an at-fault accident or two, expect to pay more for car insurance.
- Your gender: Statistically, men are involved in more traffic accidents and have more serious traffic violations, like driving under the influence and reckless driving. So, women often receive lower insurance premiums than male drivers.
- Your location: Typically, city dwellers pay more for auto insurance than drivers in rural areas and small towns. Premiums can vary widely among locations, often due to auto theft and vandalism statistics. If you live in a high-crime area, you may receive a more favorable rate if you park in a secure garage or your vehicle has anti-theft devices.
- Your age: For the youngest drivers, age can play the most impactful role in their auto insurance rates. Statistically, young drivers are involved in more accidents than older motorists. In 2018, teen drivers 16 to 19 years of age were involved in three times as many fatal crashes as all other age groups. Based on a survey by the Centers for Disease Control and Prevention, teenager-involved auto accidents resulted in over $13 billion in fatal and non-fatal injuries, in 2017 alone. According to the CDC, young drivers experience a higher rate of accidents due to: alcohol use, excessive speed, inexperience and driving during nights and weekends when accidents are most likely.
When do auto insurance rates go down?
Unfortunately, the number of highway fatalities in vehicles driven by people 20 to 24 years of age are 28 percent higher than those driven by teens, according to IIHS. Nonetheless, you may see a rate decrease when you turn 25, but only if you play your cards right.
Insurance carriers often reward you with rate decreases when you reach certain milestones in your young adult life. For example, if you get married or buy a house, you may qualify for a premium decrease. Because accidents involving drivers 25 to 29 years old result in fewer driver and passenger fatalities, insurers often offer these young adults a premium decrease.
However, reaching your 25th birthday won’t guarantee a reduced rate. You must remain accident free, avoid traffic violations and maintain a good credit rating to qualify for a premium decrease. As your 25th birthday approaches, speak with your insurance agent to find out if you will qualify for a better rate. If you’re not satisfied with the rate your current carrier will offer, you might want to shop around for a better price.
If you consistently follow traffic laws, avoid accidents and don’t file insurance claims, enrolling in a usage-based insurance program may also help you achieve a lower rate by your 25th year. Usage-based programs, like Allstate’s Drivewise and Progressive’s Snapshot, monitor your driving habits in real time and reward safe drivers with reduced rates.
If you avoid accidents, claims and traffic violations and maintain a good credit rating, your auto insurance premiums should continue to decrease until you reach your mid-60s. Older drivers pose a slightly higher risk to insurers than middle-aged motorists. As drivers age, some develop poor eyesight or have slower reflexes, which causes them to lose control of their vehicles or have accidents. Some older drivers feel overwhelmed on the road or face diminished driving skills due to medical conditions such as arthritis or Parkinson’s disease.
How to save on auto insurance
Throughout your driving years, you can find many ways to save money on car insurance:
- Shop around to find the best auto insurance rate.
- Before buying a new car, check with your insurance agent to find out how much it will cost to insure. Avoid buying costly automobiles, like sports and luxury vehicles, to enjoy the lowest insurance rates.
- Take advantage of discounts. Young drivers can often earn a discount for good grades, and some insurers offer rate cuts for retirees. You may also qualify for discounts if you purchase multiple policies, take a driver safety course or drive a vehicle equipped with safety and security devices.
- If you purchase a home or get married, inform your insurance company and find out if you qualify for a discount.
- When you pay off a vehicle, consider dropping collision and comprehensive coverages. However, keep in mind if your car is stolen or totaled in an accident deemed your fault, you’ll have to replace it out of your pocket. You should weigh the savings versus potential costs to make a decision.
- If you’ve taken advantage of all discounts and you’re still not satisfied with your rate, consider raising your deductible.
- Maintain a good credit rating.
- Reduce your annual mileage. By reducing your driving, you’ll likely reduce your insurer’s risk, which could earn you a lower premium.
- If you can comfortably pay out of pocket to make fender bender repairs, avoid filing a claim. Some insurers offer discounts for policyholders who don’t file claims during a certain period.
While one of these things isn’t a guarantee of lower rates, doing as many as you can should cause a reduction in how much you pay.
Your age plays a major role in the rate you’ll pay for car insurance:
- Drivers 24 years of age and under often pay the highest insurance rates.
- Auto premiums often start dropping after you turn 25.
- Typically, drivers in their 40s and 50s pay the lowest rates.
- Your car insurance rate may increase in your golden years.
Teen and young adult drivers typically pay the highest insurance rates because statistically, they are involved in more accidents than motorists in other age groups. During your first 10 years on the road, maintain a good driving record by avoiding accidents and traffic violations. You should also pay your bills on time because a poor credit rating can increase your auto insurance premium in most states.
There’s no guarantee that your insurer will lower your car insurance rate after you turn 25, but if you follow the preceding tips, you’ll have a much better chance of a reduced rate. Luckily, you should enjoy much lower rates throughout middle age. When you reach a new milestone, like marriage or home ownership, always inform your agent and request any available discounts. If you aren’t satisfied with your insurance rate, shop around for a better price.