5 tips for young drivers to help reduce car insurance

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This article is reprinted with the permission of NerdWallet. Insurance costs for drivers in their 20s can be staggering: After teens, young adults have some of the highest auto insurance rates in the country. In fact, the average auto insurance rate for drivers ages 20 to 25 is roughly $ 2,200 a year for full coverage, according to a 2020 NerdWallet analysis of the nation’s top five insurers. That’s about $ 700 more a year than the average rate for a 40-year-old driver.

Why is car insurance so expensive for young drivers? Drivers between the ages of 20 and 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. Young drivers, such as teens, are inexperienced and more likely than older age groups to take risks such as speeding and not wearing a seat belt. For example, the IIHS has found that young people ages 16 to 24 in the front seat are the least likely to wear a seat belt, and drivers who accelerate tend to be younger than drivers who do not. The IIHS also found that 42% of drivers between the ages of 21 and 30 who died in crashes in 2018 had a blood alcohol content equal to or greater than the legal limit, more than any other age group in the study. As drivers age, risky driving behavior declines and accident rates stabilize around age 30, according to Eric Teoh, director of statistical services at IIHS. Even so, young drivers can still save on auto insurance by following a few guidelines. Drive Safely Don’t drink and drive, avoid accidents and slow down. It sounds simple, but a clean driving record can save hundreds of dollars a year. A separate 2020 NerdWallet analysis showed that, on average, 25-year-old drivers pay nearly 25% more per year for full coverage auto insurance after a speeding ticket and nearly 50% more annually thereafter. from a car accident. Staying “ticket free and accident free is a big step toward getting less expensive insurance,” says Michael McCartin, president of Joseph W. McCartin Insurance Inc., an independent agency in the Baltimore and Washington, DC metropolitan areas. “You don’t want to be 22 and look for insurance with three fines.” 2. Compare In addition to age, insurers use a variety of factors to determine rates, including gender, location, and the make and model of your car. Because each company weighs these factors differently, getting auto insurance quotes from multiple providers is the best way to find a good rate. Try to compare the auto insurance rates of at least three insurers for equal amounts of coverage once a year or when a major change occurs, such as moving or getting married. Take Advantage of Discounts Ask your insurer about discounts you may qualify for. McCartin says young drivers will save the most when bundling insurance if they buy another policy from the same company. And young drivers still living at home save by following the same policy as their parents. Other discounts young drivers can apply for include price discounts for being a student living away from home, getting good grades, and completing a driver’s education course. Consider non-traditional car insurance If you won’t be driving much for the foreseeable future, you could save money by switching to pay-per-mile insurance, with rates based on the number of miles you drive. Similarly, if you’re a safe driver, consider usage-based coverage, which uses an app or device to track driving behavior, such as speeding and hard braking, to determine a discount or reward. While some companies specialize in mileage insurance, many traditional insurers offer both options. Build Your Credit In most states, insurers use a credit-based insurance score to calculate your auto insurance rate. This score looks at information like payment history and outstanding debt, similar to credit scores used to get a credit card or loan, but weighted differently. The practice is not allowed in California, Hawaii, Massachusetts, or Michigan. In other states, credit can affect auto insurance rates more than a DUI for some drivers. On average, 25-year-olds with bad credit pay 74% more a year for full coverage auto insurance than drivers with good credit, according to NerdWallet’s rate analysis. You can improve your credit by: Paying bills on time. Pay off credit card debt. Keeping your credit utilization low, the percentage of your total available credit is low. Learn more about your score by getting a free credit report. More from NerdWallet Kayda Norman writes for NerdWallet. Email: knorman@nerdwallet.com.