Insurance Rates and Discounts

Unfortunately, the cards are stacked against young and first-time drivers when it comes to insurance. This is due to their lack of experience and the relatively poor record of the first-time drivers who came before them. But there are options available to lower this cost.

Insurance payments can make or break your budget. Here are the factors with the greatest influence on cost:

  • What you drive: Rates are often pinned to the type of vehicle you pick. Sports cars are likely to have higher insurance premiums than subcompacts. Ask your insurance company for the rates on a range of vehicles.
  • Age: Insurance rates vary broadly, but for a young adult financing a new car, they typically range from $1,000 to $5,000 a year, depending on the model. In securing insurance, the driver's age and the vehicle type are the leading factors in determining rates.
  • Actuaries' revenge: Because they're statistically more liable to get in an accident, young adults also wind up paying 25 to 50 percent more than their parents for automobile insurance. According to insurance company statistics, 15- to 20-year-olds account for 14 percent of all driver fatalities but represent only 6.4 percent of licensed drivers. The main reason is that younger drivers lack experience.
  • Piggybacking: In general, premiums may be lower if young adults are covered in a rider on their parents' policy and gradually switch to their own policy as they get older.
  • Being a grind pays off: In many states, students can qualify for a discount if they have good grades or have completed a driver's education course. (Not all states require formal driver's ed.) This can knock as much as 20 percent off the price of a policy. Ask your insurer if this discount is available.
  • Milestones: Keep in mind, too, that insurance companies lower premiums at ages 21, 25 and 30, and for lifestyle events that (they believe) signal greater maturity, such as getting married and having a baby.
  • This will go down on your permanent record: Your driving record is critical: Accident-prone drivers with a pile of insurance claims or traffic tickets will pay higher insurance rates.
  • Suburban advantage: Young adults in urban areas typically pay higher rates. Insurance companies say that's because urban areas tend to have more traffic and older neighborhoods, where cars are often parked on the street instead of in garages and are targets for thieves.
  • Coverage: When you're shopping insurance rates, one of the first questions you may ask is whether comprehensive coverage is necessary. (Comprehensive addresses non-collision losses such as fire or theft.) If you're buying an older car that's well worn, and you've gotten it at a bargain-basement price, you may want to skip comprehensive coverage.
  • Use: Finally, how you plan to use the car will affect your rates. Short commutes in urban areas are often considered riskier than long hauls on the interstate. While some of the above charges and discounts happen automatically when one buys insurance, other breaks must be requested specifically.
Discounts to Request

Looking for ways to cut your insurance premium? Here are some of the discounts for which you may qualify now or in the near future:

  • Anti-theft device: For the most effective security devices — especially engine cutoff switches that keep the car from running unless precisely the right key is used — companies often discount comprehensive coverage by 10 percent. Check with your insurer for other anti-theft discounts.
  • Combined policy: The company that provides your homeowners' or renter's insurance may grant a 10 to 15 percent break on your auto insurance.
  • Driver's education: If you've taken a high school or private driver's education course, you could have your premiums cut by 5 to 10 percent. A student with a good academic record also may qualify for a discount.
  • Good credit rating: Insurers have come to believe that drivers with a good credit rating overall are also good insurance risks. You can't apply for this discount directly; your credit standing may well be factored into your original rate quotation.
  • Grades and membership: You must maintain a B average or be on the dean's list to qualify for a good student discount. Individual policies will vary; check with your insurance agent.
  • Safe driver: If you've had no moving violations or accidents in the past three years, you may be able to cut your premiums by as much as 40 percent. This is especially true if you have access to direct-selling companies such as Amica and GEICO, which only accept such drivers.
© Cars.com 2/11/09