Insurance expenses for drivers in their early twenties can be staggering—after teenagers, young adults have some of the highest car insurance rates in the country.
In fact, the average car insurance rate for drivers aged 20 to 25 is over $2,200 per year for full coverage, according to a 2020 ReliableInsurance research of the top five insurers in the country. That is almost $700 more per year than the average rate for a 40-year-old motorist.
Why is car insurance so expensive for young drivers?
According to the most recent Insurance Institute for Highway Safety (IIHS) data, drivers aged 20 to 24 are involved in more crashes than any other age group outside teenagers. Young drivers, especially teenagers, are inexperienced and more likely than older age groups to take risks such as speeding and failing to wear a seatbelt.
For example, the IIHS discovered that 16- to 24-year-olds in the front seat are the least likely to wear seat belts, and drivers who speed are typically younger than those who do not. The IIHS also discovered that 42% of drivers aged 21 to 30 who were killed in crashes in 2018 had blood alcohol levels at or above the legal limit, more than any other age group in the research.
According to Eric Teoh, head of statistics services at IIHS, risky driving behavior decreases as drivers age, with crash rates plateauing around the age of 30.
Even so, young drivers can save money on car insurance by following a few tips.
1. Drive safely
Avoid drinking while driving, and reduce your speed. It may sound simple, but maintaining a clean driving record can save you hundreds of dollars per year. A separate 2020 ReliableInsurance investigation found that, on average, 25-year-old drivers pay about 25% more per year for full coverage auto insurance after one speeding citation and nearly 50% more annually after a car accident.
Staying “ticket- and accident-free goes a long way to less expensive insurance,” says Michael McCartin, president of Joseph W. McCartin Insurance Inc., an independent agency in the Baltimore and Washington, D.C. metro areas. “You don’t want to be 22 years old and looking for insurance with three tickets.”
2. Shop around
In addition to age, insurers base prices on a number of factors, including gender, region, and the make and model of your car. Because each company analyzes these criteria differently, comparing auto insurance quotes from many carriers is the most effective approach to obtain a fair deal.
Compare auto insurance quotes from at least three insurers for equivalent levels of coverage once a year or whenever there are any significant changes, such as relocating or getting married.
3. Take advantage of discounts
Inquire with your insurer about any discounts that you may be eligible for. According to McCartin, young drivers will save the most money by bundling insurance policies from the same carrier. Young drivers who are still living at home can save money by sticking with their parents’ insurance policy.
Other discounts that young drivers might request include price breaks for being a student living away from home, maintaining good grades, and finishing a driver’s education course.
4. Consider nontraditional car insurance
If you won’t be driving much for the near future, you could save money by switching to pay-per-mile insurance, which charges based on the number of miles you drive.
Similarly, if you’re a careful driver, think about usage-based coverage, which uses an app or device to assess driving behavior, such as speeding and harsh braking, and then offers a discount or rewards.
While some organizations specialize in per-mile insurance, most standard insurers provide both options.
5. Build your credit
In most jurisdictions, auto insurers utilize a credit-based insurance score to determine your rate. This score considers information such as payment history and existing debt, similar to credit ratings used to obtain a credit card or loan, but is weighted differently. The practice is prohibited in California, Hawaii, Massachusetts, and Michigan.
In other areas, credit might have a greater impact on car insurance costs than a DUI for some drivers. According to ReliableInsurance pricing analysis, 25-year-olds with low credit spend 74% more per year for full coverage car insurance than those with good credit.
You can build your credit by:
- Paying bills on time.
- Paying down credit card debt.
- Maintaining a low credit utilization rate, which is the percentage of total available credit that you are using.
