Auto insurance companies consider a broad range of factors to determine how much risk they assume by insuring a driver. Unfortunately for new drivers, one of those factors is driving experience. Those with little to no driving history tend to be significantly riskier to insure, so they'll have to pay higher premiums during the first few years of their driving careers. However, some insurance companies offer cheaper rates than others, and new drivers may be able to receive additional discounts to make their car insurance policies more affordable.
What Auto Insurance Do New Drivers Need?
Every state requires you to obtain auto insurance or have proof of financial responsibility in order to drive legally. How much coverage you need to purchase will be determined by the minimum level of insurance required by your state. But it's often wise to purchase more than your state's minimum coverage to be adequately protected.
Typically, you'll be required to purchase liability insurance, which pays for injuries and damage you cause to others and their property. Liability insurance is broken down into three parts:
- Bodily injury (BI) insurance per person injured
- Bodily injury insurance per accident
- Property damage (PD) insurance
For example, drivers in California must purchase $15,000 of BI insurance per person injured, $30,000 of BI insurance per accident and $5,000 of PD insurance. You may see insurance companies use a shorthand to express the coverages—in this case, it would be written as "15/30/5." While such coverage would protect you from most minor accidents, it may fall short if you kill or critically injure another driver or one of their passengers.
You may also be required to purchase uninsured or underinsured motorist insurance (UIM BI/UIM PD), which will cover you if you get into an accident with someone who lacks adequate coverage. Additionally, 16 states require personal injury protection (PIP) insurance, which will help pay for your own medical costs if you're involved in an accident.
In addition to your state's mandatory insurance coverage, you'll need to decide if you want to purchase optional coverage, such as collision and comprehensive insurance. Collision coverage will reimburse you for damage to your own vehicle if you cause an accident, and comprehensive insurance covers damage to your car that may arise from a nondriving incident, such as hail or theft.
How Do Age and Experience Affect Car Insurance Rates?
Unfortunately, as a new driver, car insurance companies will perceive you as a higher risk to insure, and they will raise your rates accordingly. However, one of the biggest factors that raises new driver rates is age. By analyzing quotes from more than 20 auto insurance companies, we found that the youngest and oldest drivers pay significantly more than drivers in the middle. Here are the average costs of car insurance by age.
Young age goes hand in hand with a lack of driving experience. Teens, who tend to be less risk-averse, cause more accidents on average than middle-aged drivers. However, many people do begin driving later in life. If you're a new but not young driver, you'll still pay higher rates than other drivers your age. However, you'll see less of an increase than your younger counterparts.
For example, we obtained GEICO quotes for a six-month policy for two new drivers in Texas. Their location, coverage and driving experience were exactly the same. The only difference was their age. For the sake of comparison, we also obtained a quote for a 25-year-old who had obtained their license at age 16.
|Age||Driving Experience||Monthly Premium (after initial month's down payment)||Total Policy Premium (if paid upfront)|
In the first two cases, the individual was a male, had no driving history, and had obtained his license in the previous month. In the third example, the same driver had a clean driving history of nine years. Each owned a 2014 Honda Accord, which they would drive approximately 20 miles per weekday for their daily commute. However, the 25-year-old with no driving history was offered a quote of $1,384 less than the 17-year-old for the six-month policy—due to his age. By comparison, the 25-year-old with nine years' of driving history received a quote for $1,825 less than the 25-year-old new driver.
There is no set rule that dictates when drivers will receive discounts on their auto insurance premiums. However, once you reach age 25 and have four to five years' worth of driving experience (without any accidents or moving violations), you should notice a decrease in your rates.
The Best New Driver Insurance
The best way to find cheap auto insurance is by comparing personalized quotes from at least three insurance companies in your state. While certain insurers tend to offer the cheapest rates nationwide, smaller insurance companies that are available in your area may offer the best rates for you specifically. For example, if you are shopping for insurance for a teenager, you should compare quotes from your state's cheapest insurance companies for teen drivers against quotes from nationwide providers, such as GEICO or State Farm.
Find the Cheapest Auto Insurance Quotes in Your Area
Regardless of age, you will have to pay more for your insurance policy if you lack driving experience. However, there are a few steps you can take to lower your monthly bill.
Consider the Car You Drive
If you're in the process of buying your first car, consider how expensive that vehicle will be to insure. Generally, the more expensive a car is, the higher your auto insurance premiums will be. For example, vehicles with high-tech features, such as rear-view cameras and bumper sensors, drive up insurance costs since even minor damage can be much more expensive to repair. On the other hand, insurance companies also consider the safety of a vehicle when determining rates. As a new driver, you might want to choose a vehicle that has a low- to mid-range price and a good safety rating.
Join a Family Policy
If you live with parents or other family members who already drive, adding yourself to their policy may help you receive lower rates. Most insurance companies offer discounts for policies with multiple people. However, adding a new driver to the policy will disproportionately increase the plan's monthly cost, so you'll need to work out with your family members who will pay for the additional premiums.
Bundle Your Policies
If you already carry a renters insurance policy, ask your insurance provider for an auto insurance quote. They may offer you a discount for carrying multiple policies with them.
Typically, the quote you receive from insurance companies reflects the price you'd pay if you submit the entire policy premium upfront. However, if you choose to pay in monthly installments, you'll end up paying more. This is because insurers also charge a convenience fee for monthly payments. The amount you'll save by paying in one lump sum varies by insurer. However, you could save 5% to 10% if you pay for your entire policy upfront. As a new driver, your total policy price might be more than you can afford to pay in one lump-sum payment—but if you can, you could reduce your overall costs.
Ask About Other Discounts
Insurance companies offer a number of discounts for drivers in various stages of life. For example, many insurers offer discounts for the following.
- Drivers who have completed a defensive driving class
- Student drivers who maintain a 3.0 grade-point average or higher
- Accident forgiveness, if you've only had a single accident
- Discounts if you maintain a clean driving record
- Discounts if you have an alarm, location device or other security features in your vehicle