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Car insurance for first-time buyers

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Getting your license for the first time provides you with enormous opportunity for freedom, but it comes with certain legal obligations. In order to legally drive a car, you’ll need to purchase car insurance. Insurance providers view new drivers as riskier to insure because they lack experience, which means you will likely be charged a higher rate for your auto insurance policy. 

Parents of new teen drivers can expect to pay 130% more for car insurance on average. Ultimately, inexperience contributes to higher rates in most states, regardless of age. The only exception is Hawaii, which prohibits rate increases due to age and inexperience. 

While insurance is required and is typically more costly for new drivers, there are strategies you can use to reduce the overall cost. Here are a few ways to secure lower rates:

Getting car insurance for first-time buyers

  1. Consider getting added to the family policy.
  2. Shop around for the lowest rates.
  3. Ask about discounts.
  4. Purchase a policy that provides the coverage you need.
  5. Regularly obtain and compare customized quotes from different providers.

Consider getting added to the family policy

If you’re a teen driver living at home or a college student using your parents’ vehicle while away at school, your parents can add you to their family policy. While their rates might increase up to 130%, it will likely be cheaper than getting your own policy. If your parents own your car, your insurance provider likely won’t be willing to underwrite a separate policy for you anyway. Typically, insurers want the name on the policy to match the name on the vehicle’s registration. 

If you’re added as a driver on an existing policy, you’ll likely be able to avoid a downpayment, and your insurance policy will apply any discounts that your family is eligible for to reduce the overall rate. 

However, there are some instances when it might be cheaper for a new driver to purchase their own policy. For example, if you’re a teen who bought your own used car and your parents drive a luxury vehicle, you might find that purchasing your own policy will be cheaper. 

Shop around for the lowest rates

The cost of car insurance varies greatly from one insurer to the next. That’s because every provider weighs your personal information, driving record and credit score a little differently. The best way to ensure you get the best deal is to compare quotes from multiple providers. 

You can do this by visiting each car insurance company’s website directly to check your estimated premium amount, or you can use an auto insurance comparison tool. If you’re unsure where to start, GEICO and Nationwide are both known for providing affordable car insurance to new drivers, or you can also check out the best car insurance companies of 2020

It may be helpful to assess your quotes based on different situations. For example, quotes based on adding yourself to your parents’ policy, as opposed to purchasing a separate policy for yourself. 

Ask about discounts

Whether you’re adding yourself to your family car insurance policy or purchasing a policy on your own as a new driver, pay attention to discounts you may be eligible for. Standard discounts you likely qualify for include:

  • Multi-policy discounts
  • Multi-vehicle discounts
  • Good student discounts
  • Student away at school discounts
  • Safe driving discounts
  • Discounts for good/infrequent driving based on telematics devices

While rates may start significantly higher as a new driver, discounts can be a huge help. Be sure to ask each company which discounts they can provide as you compare potential providers. 

Purchase a policy that provides the coverage you need

Other factors influencing your premium amount include the type and level of coverage you purchase, as well as your deductible amount. But while you may be able to save money by only purchasing liability coverage, you’d be responsible for any damage to your vehicle in an accident you cause. 

And while raising your deductible will get you a somewhat-lower rate, it does mean more money out-of-pocket to pay for repairs in the event of a claim. When choosing a deductible amount, make sure you have the funds available to cover your costs in case of an accident. 

Regularly get customized quotes from different providers

The more driving experience you gain, the more your premium will drop. So it’s a good idea to evaluate your options every six months. The cheapest policy available for a new driver may not be the same as the cheapest policy available for a driver with six months of experience. Therefore, it may be in your best interest to switch insurance companies once you have more driving history. 

Why first-time drivers pay more for car insurance than experienced drivers

Insurance companies determine your rate by assessing the risk to insure you. That means if a provider determines that you’ll be more likely to file a claim, it will charge you more for your policy. According to the CDC, young drivers are particularly risky to insure. Teens in the 16-19 age range are three times more likely to be involved in a fatal crash than adult drivers in their 20s. 

In addition, a study from The Children’s Hospital of Philadelphia found that 75 percent of these crashes result from a driving error on the part of the teen. This indicates that the reason for most teen crashes is inexperience. Naturally, insurance companies look at inexperienced adult drivers as posing a high risk as well. 

Having a driving record also gives insurance providers an idea of how likely you are to file a claim. Without that information, the insurance provider can only guess at your driving ability. All of this adds up to higher insurance costs for first-time drivers. 

How first-time drivers can find cheap car insurance

  • Shop around. Compare quotes across insurers and check to see if it would be cheaper to get an individual policy or be added to your family policy. 
  • Ask about discounts. Some insurance companies offer discounts to students away at college, and most will offer a discount to students who maintain a B average or better. 
  • Take a defensive driving course. Some insurance companies will offer a discount to teens who complete a defensive driving course. 
  • Install a telematics device. Monitoring devices and apps that track your driving behavior and mileage can help prove to your insurer that you are a safe driver. If you drive frequently, unsafely or late at night, these devices could raise your premiums. However, they’re more likely to help you save if you practice safe driving habits. 
  • Raise your deductible. A higher deductible means a lower monthly premium, and vice versa. Provided you have an emergency fund to pay for repairs not covered by your insurance company, raising your deductible could be an easy way to get a lower rate. 

The takeaway

  • Driving with car insurance is required in every state except New Hampshire and Virginia, which have non-standard insurance requirements. However, insurance is a great protection for all drivers.
  • Young and inexperienced drivers pay more for car insurance because insurers view them as a higher risk. 
  • Getting added to an existing policy usually helps keep costs down, but not always. It’s important to shop around for both individual and family policies to get the best rate. 
  • You can reduce your premium by qualifying for special discounts, limiting your coverage amounts or raising your deductible. 

First time car insurance is often expensive, but it is possible to find cheap auto insurance for new drivers. Your best bet is to get customized quotes from different insurance providers. Play around with coverage amounts, deductibles and discounts until you find a policy that fits in your budget.

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