Why your first car insurance policy will probably be your highest.
Getting your license is a rite of passage for both teens and their parents. But it’s a rite of passage that can come with a hefty expense: the cost of buying auto insurance for new drivers.
How much is car insurance for a new driver? A lot can influence the price, but premiums for new drivers are a lot more than for experienced drivers. For parents, adding a teenage driver to your plan can raise your premiums by nearly 80%.
Read to find out:
In order to understand why young drivers get quoted such high car insurance rates, it’s important to understand how car insurance premiums are set.
Car insurance rates are based on a number of factors, both about you personally and about people like you, all in order to figure out the likelihood of you making a claim. Essentially, the more likely you are to get in an accident, the higher your insurance rates are going to be.
Here are some of the factors insurance companies use to decide how likely you are to get in an accident or have a claim — and how they decide on your insurance rates:
New drivers auto insurance costs so much because new drivers, generally, aren’t very good at driving. And since each individual driver doesn’t have a driving record to prove otherwise, it’s assumed that new drivers are bad drivers.
Insurers pull information about similar drivers to help set car insurance rates. They use aggregate data to know that women are less likely to get into accidents than men, and young people are more likely to get into more accidents than more experienced drivers. That’s how insurance companies know that teenagers are terrible drivers. They’re statistically more likely to speed, tailgate, and not wear their seatbelts.
The Insurance Institute for Highway Safety notes that teenagers have a higher crash rate despite driving fewer miles than adults; the probability of dying in a crash is higher for teenagers than it is for drivers just a few years older.
That’s why car insurance rates tend to decrease as you age – car insurance rates go down at 25 (typically) — and then once you hit age 65, they go back up.
So even if your teenager is a really, really good new driver, his first auto insurance rates will still be based on the behavior of other new drivers — and that means those rates are going to be high.
The good news is that there are ways new drivers (and their parents) can save on auto insurance:
The first thing to do to keep your teen driver’s rates as low as possible is to add them to your policy instead of buying them their own.
It’s almost always cheaper to bundle policies than it is to have a separate one, and as long as your residence is their primary residence (and even if they’re living in a dorm, it probably is), they can be on your policy. (Once they officially move out, however, they’ll need their own separate policy.) Another bonus: if you are adding a vehicle as well as a driver, you could get a multi-car discount.
One exception: if you have several cars or luxury cars, it may make sense to buy your teen his own policy to drive another, less expensive car. (See below.) Get quotes both ways.
A good driving record free of accidents and tickets means an insurer won’t jack up rates. Plus, some insurers will offer "good driver discounts" to reward good driving. The same goes for traffic violations; not only will drivers save on car insurance, but they’ll avoid ticket fees at the same time.
It’s worth mentioning that if you’re a parent, you should avoid accidents and violations, too. Getting points on your license can raise your rates, and some insurers will increase rates for accident claims of any amount, even if the accident wasn’t your fault. Keep your rates low and set a good example by being a responsible driver yourself.
New drivers plus expensive vehicles or fast cars means extremely high rates. Keep your rates lower by only allowing your teen to drive something sensible with good safety features and a high crash test rating.
If you have luxury vehicles or sports cars, it may make sense to price out both adding your teen to your policy and getting him a separate policy to see which is cheaper.
Another strategy is to let your teen drive an older, cheaper car and buy him his own policy that forgoes collision coverage and comprehensive coverage. You won’t get anything if the car gets damaged or totalled, but by opting for liability insurance only (and underinsured and uninsured motorist driving if your state requires it), your insurance premiums may be substantially less.
Insurers use stats to set their rates, and one of those stats is that students with good grades are better drivers. That means if a student can keep their grades up, some insurers will reward them with lower rates.
Similarly, some car insurers give discounts for completing driver’s ed courses, so new drivers can hone their skills and save money at the same time.
Disclaimer: Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.