The average monthly premium for drivers under 25 is $285. For drivers over 25, the average monthly premium for full coverage insurance is around $90 to $100. If you are just getting started with your career or still in school, this rate could be crippling for most drivers under 25. Luckily, there are a few key ways to save on car insurance for drivers under 25.
In this blog, we’ll go over some of the techniques you can use to lock in lower premiums as well as the common factors that make up your auto insurance rates.
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Why Is Insurance More Expensive For Drivers Under 25?
You may be wondering why drivers under 25 are often expected to pay more for the same level of auto insurance as anyone else. One of the biggest reasons is that younger drivers are seen as a greater risk to insurance companies.
Statistics show in 2019, 52% of fatal motor vehicle crashes that included teens occurred on Friday, Saturday, or Sunday. Overall, the crash risk is much higher for newly licensed drivers. Studies attribute the increased likeliness of an accident to a lack of experience on the road.
The longer a driver has been driving, the more experience they’ll have. Thus, there’s a smaller likelihood of a collision. While this isn’t always true depending on the individual, it’s how the insurance companies think.
Even if you are a safe driver, if you’re under the age of 25, you can expect to pay extra for insurance due to your age. That said, it’s important to understand other factors that contribute to your insurance premium amount if you’re still determined to lower your monthly payment.
Factors That Help Determine Auto Insurance Premiums
On the bright side, your age is not the only thing that determines the price of an auto insurance policy. There are other factors including things like your:
- Driving history: If you’re younger, this might not be much. However, if you’re 23 and have had a license since you were 16 with no accidents or moving violations on your record, this could be helpful
- How much you drive: Auto insurance companies may ask you to disclose how many miles you drive per month or per year. Generally, the more miles you drive this increases the chance of getting in an accident and the insurance company may want to charge more. However, if you only drive locally such as to work or school, for example, your mileage may not be seen as risky.
- Your gender: Typically insurance companies will charge men higher premiums since statistics show that men get into more auto accidents.
- Credit Score: Auto insurance companies tend to consider your credit score when determining your premium. Aside from your personal credit score, you actually have an insurance credit score as well. This helps predict the likelihood or filing a claim and the potential cost of that claim.
- Your Location: Yes, insurance rates can also be influenced by your location. Prices can go up and down depending on this factor which is why most companies ask for your zip code when providing a quote. Urban drivers often pay more than drivers who live in more rural areas and small towns. This is due to the fact that theft, accidents, and vandalism are more common in busy cities.
One factor insurance companies can’t use is race or religion. It is illegal to use race or religion as a basis to determine someone’s auto insurance rate.
9 Ways To Save Money On Car Insurance For Drivers Under 25
1. Shop Around
No matter what your age is, it’s always helpful to shop around for car insurance rates and compare your options. Don’t stop at receiving a quote from just one insurance company. Competitors exist for a reason and other companies may offer you a better premium. Shopping around can ultimately save you hundreds to thousands in insurance premiums per year.
Doing this also helps you negotiate if you do receive a higher quote. You can share what another company quoted you for similar coverage and negotiate. Shopping around for insurance is now easier than ever. In the past, you might have had to call insurance companies or fill out quote forms one by one.
Now, you can use insurance comparison sites to quickly see rates and coverage options from multiple companies all in one place. The Zebra is a helpful tool that allows you to do this. You can use The Zebra to compare prices for homeowners, renters, auto insurance, and more from top insurance companies. You’ll need to fill out a form which takes a few minutes. Then without signing up for anything, in particular, you’ll be able to compare rates and determine how you’d like to proceed.
2. Consider the Car You Drive
The car you drive makes a difference when you’re trying to save money on car insurance. Some cars are considered safer to drive and thus seen as less risky by insurance companies. If your car has safety features on it such as anti-theft control, you could be entitled to an insurance discount.
Other factors like the cost of repairs for your type of vehicle, engine size, and overall safety of the car are heavily considered. Some vehicles are harder to repair or find the correct parts for which makes it more costly to work on. Insurance companies will definitely factor this into your rate.
In fact, there are quite a few lists of the most affordable cars to insure. Some of those include cars like the Honda CR-V, Hyundai Tuscon, Ford Escape, and Jeep Wrangler. While you shouldn’t swap your current car for one of the options named cheaper to insure, it’s still something to consider if you are under 25 and in the market to buy a new car.
3. Show Your Good Grades
Being a good student comes with many benefits. One of those is the potential to save on car insurance rates for drivers under 25. If you’re a high school or college student, some companies are willing to offer a discount on your auto insurance premium. Allstate, State Farm, Progressive, and Geico are just a few companies that offer this.
How it works varies by the company, but you typically need at least a B average to qualify. Students (under age 25) could qualify whether you’re in high school, college, or homeschooling. A minimum 3.0 GPA is similar to a B average. Or, you’ll need to be in the top 20% of your class.
Ask your auto insurance provider about their student discount program, then submit your grades, transcript, ACT score, or any other relevant information. Since so many companies offer a discount for good grades, be sure to shop around to compare the savings for insurance coverage. You may be able to save 15% to 20% on insurance premiums with a valid discount for having good grades as a student.
4. Student or Teenager Discount
Even if you don’t qualify for the ‘good grades’ discount offered by many insurance companies, you still may be able to score a discount for simply being a student or teenager. Yes, companies may see teens are a greater risk to insure. However, some still offer a slight discount to students to help alleviate the costs.
For example, Allstate has a Smart Student discount that you can qualify for in one of three ways. The first option is to be a full-time student earning good grades. Or, you could successfully complete the teenSMART driver education program. The final option to qualify is to attend school at least 100 miles away from where your car is garaged.
Be sure to ask the companies you’re considering if they have any teenage or student driver discounts that are not based on GPA or academic grades.
5. Bundle Your Insurance
Bundling your coverage is a great way to save on car insurance for drivers under 25. You can often purchase homeowner’s, renter’s, auto and even life insurance all from the same carrier. Some companies even offer travel, pet, business, and cell phone insurance.
If you rent an apartment, see if you can bundle homeowner’s insurance with your rental insurance. Most companies will give you a 16% to 25% discount by bundling your insurance coverage.
Bundling only works if you need different types of insurance. If you want to obtain rental and cell phone insurance regardless, for example, then the savings will benefit you. On the flip side, don’t sign up for different types of insurance just so you can get a discount. You’ll just end up spending more money on premiums and possibly not fully understand the benefits of your coverage.
6. Remain on Your Parent’s Insurance
There is always the option for drivers under the age of 25 to remain on their parents’ auto insurance to save money. As long as you’re living at your parents’ house, you can remain on their auto insurance policy. While teens and adults under the age of 25 could pay thousands per year on insurance, your parent won’t be quoted that high so long as they have a good driving record.
Another thing to consider is whether your name is on the title of the vehicle. If it is, you may have to get an insurance policy in your name and not your parents’ names. If you are able to get on their policy, you can even offer to pay them whatever the insurance company charges to add you to their policy.
Also, your parents may even receive a discount for adding another driver to their policy. This is commonly referred to as a ‘multi-driver’ discount. Unlike medical insurance, there is no penalty to remain on a parent’s insurance policy. With time though, your rates should go down and you’ll want to keep building a positive driving record.
7. Increase your Deductible
When selecting car insurance coverage, you can usually choose your deductible. The standard deductible amount is $500. If you opt to increase this, it could lower your premium payments. At the same time, your coverage amount might get lowered as well.
When you increase your deductible, it puts less pressure on insurance to cover your expenses in the event that you have to file a claim. Ask your insurance agent how a higher deductible could affect your premium. Then, you’ll just have to figure out whether you can afford to pay a higher deductible if you ever need to.
Start a savings account for auto expenses and set some money aside for your higher deductible. If you choose a deductible of $1,500 or $2,500 to come up with, for example, this could be challenging when it’s time to pay the insurance company. On the other hand, you’ll be saving yourself more money each month on your premium.
8. Improve Your Credit Score
Insurance companies do base their decision on your premium amount partly on your insurance credit score. Still, this often derives from your personal credit score. If you haven’t been driving for long, the company won’t have much to go on. This means they may look to your personal credit score to determine what your level of risk is.
It doesn’t hurt to work on improving your personal credit score as this can help you qualify for low-interest loans, rewards credit cards, and more. Start with a secured credit card which allows you to make a deposit that serves as your initial credit limit to borrow against. Then, keep your spending below 30% of your limit and pay your bill on time each month.
9. Use an Insurance Broker
An insurance broker is someone who serves as the middle man between you and an insurance company. They basically do the shopping around for you and get paid by the insurance company to help you get the most bang for your buck. Drivers under 25 are in a unique situation so brokers can use their insider knowledge and experience to help you find the right coverage and discounts for your situation and budget.
An auto insurance broker may know things that you don’t know about certain deals and offers. They can also help guide your decision on which level of coverage to obtain and explain industry terms for clarity. To find an insurance broker, you can check your state’s insurance regulator website or use an online database that advocates for customers like Pure Insurance.
There are some downsides to using a broker especially if they are unable to find you adequate savings or charge a separate fee. Be sure to carefully screen the insurance broker before agreeing to work with them and ask for testimonials.
Can I Get a Good Car Insurance Rate If I’m Under 25?
If you’re under 25, odds are you will be quoted a higher insurance premium than someone who is older and has more driving history. However, you can get a good car insurance rate if you’re under 25 if you’re able to be strategic. Understand the important factors that contribute to your insurance premiums in addition to your age. Then, shop around to compare your options and narrow down which strategies you wish to try to help you save.