Do car insurance rates really drop at 25?

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Do car insurance rates really drop at 25?

If you’re about to hit the quarter-century mark, how does lower car insurance sound for an early birthday gift? There’s this half-myth, half-fact floating around that when you turn 25, your car insurance rates drop dramatically, saving you a lot of money.

We’re calling it half-myth, half-fact, because, yes, 25 is the age where newbie and newish drivers often start paying less on their policies — but it doesn’t just happen all of a sudden and it might not happen at all. It all depends on a bunch of different things about you and your driving record. So if you’re nearing the midpoint of your 20s, keep reading to see how your rates might be affected by your upcoming birthday.

Why is car insurance expensive when you’re under 25?

The short answer: Because you’re a risk.

That probably doesn’t make sense, especially if you passed Driver’s Ed with flying colors, aced your DMV test, and maybe even got a good student discount for getting straight As your freshman year of college. Yet car insurance companies aren’t willing to take any risks on young teen and twentysomething drivers.

“Rates are really high when we are young and most likely to be involved in accidents,” John Espenschied of the Insurance Brokers Group in St. Charles, Missouri, says.

According to the Centers for Disease Control and Prevention (CDC), 2,333 teenagers between 16 to 19 were killed in motor vehicle accidents in 2014, while 221,313 were injured. If you were in that age range when the study was conducted, you’d be in your early 20s now, but that age group’s reputation for speeding, lack of experience, plus things like texting and driving and drunk driving mean insurance companies are apt to keep your rates on the higher side of things until you at least reach your mid-20s.

Age 25: the insurance inflection point

“In general, the cost of insurance drops starting at age 17 through age 25,” Geoff Williams, vice president of auto insurance for AllState, says. “Maturity and driving experience reduce the cost of insurance, and age 25 is the inflection point. At age 25, you are considered an experienced and mature driver, and there is no longer incremental improvement.”

But there may be a more significant drop in your auto insurance rates. Of course, like we said earlier, your insurance rates just don’t change automatically overnight as soon as you hit the big 2-5, and they don’t change only because you’ve turned 25. But, after you age out of the 16-to-24 demographic, you enter a new demographic that’s statistically speaking considered less of a risk.

“In this pool, the drivers are typically safer and more experienced than drivers just starting out at 16 years old,” Tom Wright of United Auto Insurance in Chicago says. “These years of experience help on the road and typically make safer drivers, thus reducing car insurance rates.”

Age 25: the insurance decrease exceptions

There’s an exception for the length of time you’ve been driving for. A 25-year-old motorist who just hit the road a year ago is still considered inexperienced and will likely pay higher premiums than the 25-year-old who’s been driving for nearly a decade.

Plus, there are other factors involved, like your driving record. If you got your license at 17 and your driving history’s been spotless since then, you’ll be considered for a decrease in your mid-twenties. But if it’s been eight years of speeding tickets, moving violations, accidents and more insurance claims than you can count, your rates will be more likely to go up at age 25 than down.

“Insurance companies are not necessarily going to give drivers with a history of accidents a better rate,” Wright says.

What determines your car insurance rates

Beyond that, the type of car you drive always plays a role in your insurance rates, no matter how old you are. If you’re 25, have been driving the same car since high school and have few-to-no claims attached to it, your insurance rates are likely to drop. But if you landed a lucrative gig out of college and used your hard earnings to buy a newer, nicer ride, your premiums will reflect the change (and value) of the vehicle.

“If a driver at age 25 buys a sports car, they are probably not going to have a better rate than when they were previously driving a sedan,” Wright says.

Another rate influencer is your insurance score, a special metric that combines your credit score and your insurance history. The better your insurance score, the better your chances of getting lower auto insurance rates.

“A 25-year-old who has done some work to establish and improve his or her credit score — which ultimately relates to their insurance score — may reap rewards as it relates to his or her auto premiums,” Tom Bartsch of Wisconsin-based Dairyland Insurance says.

How to ensure 25 more years of low insurance rates

You may just be turning 25, and that can mean lower car insurance. But those discounted rates could be short-lived as you get older.

“Changes in the policy, like newer vehicles, coverage changes, number of people in the house, etc. could all be factors that move the cost up,” Williams says, “so it’s easy to miss the savings you’re getting as you mature.”

So how does a millennial keep their insurance rates low for a millennia? Stay mindful of the life events that can lower your car insurance.

If you are looking to save money as you near your 30s, Espenschied says getting married, buying more cars, getting a property or renters insurance and making sure you have an excellent credit history are helpful.

“Each one of those will contribute to a lower cost of insurance when young,” he says.

Turning 25 is that time when you’re still young, but now, you’ve got enough driving experience and leverage to command lower insurance rates. Maintaining a clean driving record is the best thing you can do, but shopping around for the most affordable car insurance rates with your age in mind gives you more of an advantage with insurers. If you’re about to shop around for a new policy, you can learn more about understanding those auto insurance quotes here.

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