Here’s how to lower your auto insurance costs, even if you’re in your early 20s.
Drivers in their 20s and early 30s can face high insurance costs. Young adults have the highest rates of car insurance in the country, after teenagers.
In fact, the average car insurance rate for drivers 20 to 25 years old is about $2,200 a year for full coverage, according to a 2020 NerdWallet analysis of the top five insurers in the nation. This is $700 more than the average rate paid by a 40-year old driver.
Why is young drivers so hard-pressed to get car insurance?
Drivers ages 20 to 24 are involved in more crashes than any other age group besides teens, according to the most recent data from the Insurance Institute for Highway Safety, or IIHS. Teenagers are more likely to drive at high speeds and without a seatbelt than younger drivers.
IIHS found that drivers who speed are more likely to be 16-24 years old than those who wear seat belts. IIHS also found that 42% (21- to 30-year-olds) who died in car crashes in 2018 had blood alcohol levels at or above the legal limit. This is more than any other age group.
Eric Teoh (director of statistical services at IIHS) says that risky driving behaviors decline as drivers get older. According to Eric Teoh: Crash rates begin to level out around age 30.
Young drivers can still save money on their auto insurance by following these guidelines.
Drive safely
Avoid drinking and driving, and don’t speed up. It sounds simple but having a clean driving record could save you hundreds of dollars each year. NerdWallet also found that 25-year-old drivers paying full coverage car insurance cost nearly 25% more after getting a speeding ticket, and nearly 50% more after an accident.
According to Michael McCartin, president and chief executive officer of Joseph W. McCartin Insurance Inc., a independent agency serving the Baltimore and Washington, D.C. metro areas, staying “ticket-free and accident-free” is a great way to get lower insurance. “You don’t want to be 22 and searching for insurance with three tickets.”
Take a look around
Insurance companies use more than just age to determine your rates. They also consider factors such as gender, location, and the make and model of your car. Each company will weigh these factors differently so getting quotes from several providers to get a car insurance quote is the best way of finding a good rate.
Compare car insurance rates from at most three companies for equal coverage.
Get discounts
Ask your insurance agent about any discounts that you may be eligible for. McCartin states that young drivers can save the most money by purchasing multiple policies from the same company. Young drivers who still live at home can save money by keeping the same policy as their parents.
Young drivers may also be eligible for price breaks when they are a student, get good grades and complete a driver’s education program.
Non-traditional car insurance is an option
You could save money if you don’t plan on driving a lot in the future. Pay-per-mile policies have rates that are based on how much you drive.
If you are a safe driver, usage-based coverage may be an option. This uses an app or device that tracks driving behavior (e.g speeding, hard braking) to calculate a discount or reward.
Some companies offer per-mile insurance only, but many traditional insurers offer both.
Credit building
In most states, insurers use a credit-based insurance score to calculate your auto insurance rate. The score considers information like payment history and outstanding debt. It is similar to credit scores that are used to obtain a loan or credit card, but it is weighed differently. It is illegal in California, Hawaii and Massachusetts, as well as Michigan.
Other states have credit that can affect car insurance rates more than DUIs for certain drivers. According to NerdWallet’s rate analysis, 25-year olds with poor credit pay 74% less per year for full-coverage car insurance than those with good credit.
Credit can be improved by:
- Timely payment of bills
- Repayment of credit card debt
- Keep your credit utilization (the percentage of total credit available) low.