Getting your driver’s license is an exciting milestone, but it also leads to a major cost – auto insurance. Car insurance rates for teenage and young adult drivers are sky-high due to lack of driving experience and higher risk. The average cost of car insurance for a teen is around $4,500 per year!
The good news is there are many ways to lower your auto insurance costs, even as a young driver just starting out. Here are tips for getting the cheapest car insurance possible:
Shop Around for Quotes
The first step is getting quotes from several insurers. Rates can vary dramatically between companies, so take the time to compare. Get quotes from national insurers as well as local and regional companies. You can use an online quote tool to quickly gather and compare rate estimates. Make sure the quotes are for the same coverage amounts.
Consider Usage-Based Coverage
Usage-based or pay-per-mile programs charge based on how much you drive. This can help lower costs for those who don’t drive much, like students away at college. With a usage-based program, you pay a base rate plus an additional per-mile rate charged monthly. These programs use a telematics device in your car or a mobile app to track mileage.
Pick a Safe, Reliable Car
The make and model of car you drive is a big factor in insurance rates. Safer cars with good crash test ratings and lower claim rates will have lower premiums. Pick an economical, practical car over a flashy sports car or muscle car. Going with an older used car can also save money over insuring a brand new vehicle.
Ask About Discounts
There are many common auto insurance discounts to take advantage of:
– Good student discount: Maintain at least a 3.0 GPA for savings up to 25%.
- Driver’s ed discount: Take an approved defensive driving course for 10% or more off.
- Low mileage discount: Drive fewer than 7,500 miles per year for a lower rate.
- Good driver discount: Avoid accidents, traffic violations for 3+ years.
- Multi-policy discount: Insure your home and auto together.
- Anti-theft discount: Install anti-theft or alarm system.
Raise Your Deductible
Opting for a higher deductible, the amount you pay out-of-pocket before insurance kicks in if you file a covered claim, can substantially lower your premiums. Going from a $500 deductible to $1,000 could reduce your premium by 15-30%. Just be sure you have savings to cover the higher deductible amount if needed.
Join a Group Plan
Check if you can get a discounted group auto insurance rate if you or a parent belong to an alumni association, credit union, professional organization or other group. Insurance companies negotiate group discounts for members.
Get a Low-Profile Car
Sporty coupes, muscle cars, and souped-up vehicles cost more to insure. The reasoning is drivers are more likely to speed, race or get tickets in these car types, thus increasing risk. Go for a 4-door sedan or practical vehicle to keep insurance rates in check.
Drop Collision/Comprehensive Coverage on an Older Car
Once your car is around 8-10 years old or has over 100k miles, it may make sense to drop collision and comprehensive coverage which pay for damage to your vehicle. The premium savings could outweigh the value of the older car making it not worth having the coverage. But keep liability insurance.
Maintain a Good Credit Score
Your credit-based insurance score plays a role in your auto insurance rates in most states. Insurance companies have found a correlation between credit scores and claim risk. Keeping your credit score in the “good” range helps keep insurance costs down.
Check Rates Periodically
As you gain more driving experience and maintain a clean record over time, your auto insurance costs will go down. Most companies will automatically decrease your rate around age 25 if you stay claims-free. But anytime after the first 2 years it’s a good idea to compare rates again and switch insurers if you find a lower price.
Consider Temporary Auto Insurance
If you only need coverage for a short period of time, temporary car insurance can get you the minimum liability and state requirements at an affordable price. It’s ideal for students home from college over the summer who need coverage for a few months.
Move to an Area with Lower Rates
Car insurance costs do vary by state, city and even zip code. If moving is a possibility, check out average auto insurance rates in the area you are considering. Certain states like Maine, New Hampshire and Idaho have significantly cheaper average premiums. Urban areas usually have more expensive rates than surrounding rural suburbs and towns.
Increase Your Deductibles When Possible
As you get older and can afford higher deductibles, increasing your deductible from $500 to $1,000 or even $2,500 can lead to 20% or more in savings on your auto policy. Just be prepared to pay the deductible in case of an accident that’s your fault. Avoid filing small claims and eating into savings from the higher deductible.
Review Policy Annually
Do an annual policy review to look for ways to save. For example, if you switched jobs and have a shorter commute, you may qualify for a low-mileage discount. Or ask if any new discounts are available such as becoming a homeowner. Keeping your coverage optimized as your situation changes is key to auto insurance savings.
The most important things young drivers can do to lower auto insurance costs are drive safely and defensively to avoid tickets and accidents, shop around for the best rates, choose affordable insurance options and look for discounts. Following these tips can save hundreds of dollars a year on car insurance even with less driving experience. With smart planning, you can get the necessary coverage at the best price.
