In the world of auto insurance, there are several factors that providers use to judge the risk of insuring any driver. This can be something as basic as your age or something more specific, like the make and model of your vehicle. Every auto insurance price, or what you pay on a monthly basis, is different, and the average is very liberal. The more years of driving experience you have, the lower your prices. The question is, at what age do we start to see a reduction in premiums? The simple answer is around 25 years of age. But by the frame of a quarter century? This article explores everything related to the correlation between car insurance prices and drivers 25 years of age and older.
What Factors Determine Auto Insurance Prices?
The key word here is “risk”. Several factors, personal and your car, are what some insurance providers use to determine your prices. This may mean that your chances of making a claim are higher.
Insurance providers will determine your risk based on:
- Driving History- First and foremost, how is your driving in a vehicle? If your record shows multiple collision strikeouts, that tells the insurance company that you are more likely to make a claim. Cleaner records result in lower premiums. At the same time, new drivers who have just received their driver's license do not have a driving record yet. This leaves insurance companies no choice but to assume that the risk is higher than with an experienced driver.
- Residential Home- Something as simple as your zip code says a lot to insurance companies. If you live in an area with a high crime rate, this can increase the chances of making a claim for theft or vandalism. That in itself may require additional coverage, such as comprehensive coverage.
- Make and Model of Vehicle- The vehicle you drive is important when determining how much you'll pay for auto insurance. A sports car will cost more than a regular vehicle. Expenses for repairs and mechanical parts are taken into consideration, as is the safety feature rating. Ask yourself how much you paid for your vehicle and how safe it is, these can be the keys to determining your prices.
- Sex- While some states do not base their prices on sex or gender, most do. There are statistics that support this practice - women have been found to have fewer accidents than men. For this reason, women typically pay less in auto insurance premiums than men.
- Age- As the focus of this article, age is a significant factor in determining auto insurance prices. Age usually means the experience of the driver. These drivers, ages 25 and under, are the drivers with the highest auto insurance premiums. This article focuses on how much premiums will drop for a driver who turns 25. The results may surprise you.
- Credit- You have a credit score for your insurance that is based on how likely you are to make a claim. Note that this is not the same as your credit score where it shows your credit card payments. But, some states do look at your traditional credit history, so it helps to pay your bills on time.
Why Auto Insurance is so Expensive for Drivers Under 25 Years of Age
Typically, as a teen prepares for their driver's license, their parents prepare for an increase in their insurance. As we mentioned earlier, new drivers pay the highest prices for auto insurance due to a lack of driving history. You can also apply to drivers over the age of 25 who have never taken their driving test and received their driver's license. Still, an older new driver will have slightly lower prices than young drivers, especially those under 25 years of age.
This is also based on statistics. The Insurance Information Institute did a study in 2018 that found drivers ages 16-20 died in more traffic fatalities than any other age group. This is due to inexperience, alcohol consumption, not wearing seat belts, speeding, and using the phone while driving. During that same year, the National Highway Traffic Safety Administration reported 2,121 fatalities related to young drivers.
Do drivers under 25 years of age have basic or comprehensive coverage for auto insurance?
First of all, basic auto insurance coverage refers to only having liability coverage that your state requires. 48 of the 50 states have their own limits on how much drivers should keep. This coverage pays for injuries you cause to another driver on the road. Comprehensive coverage refers to the addition of comprehensive and collision coverage to the policy. Collision coverage covers damage to your vehicle while comprehensive coverage does the same, but when your vehicle is not in use. For a driver, full coverage costs up to $200 a month or $2,339 annually, about $700 more than basic coverage. From that alone, you can get an idea of how expensive it can be for new drivers under 25 years of age. For this reason, new drivers usually don't purchase full coverage until they have a few years of driving experience.
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