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The “Under 25” Auto Insurance Expense: What It Is And How To Offset It

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 | September 18, 2017
The “Under 25” Auto Insurance Expense: What It Is And How To Offset It

If you’re under the age of 25 (or the parent to someone under 25), you’re likely paying the highest auto insurance rates in the country. Teens and young adults are considered to be the greatest risks on the road, and thus have the highest rates of insurance premiums on average.

Let’s take a look at age-related insurance risk, how risk influences premiums, and what you can do to keep your “under 25” auto insurance expense to a minimum.

Why does age matter?

To insurance companies, age is more than just a number. In fact, age is a strong factor in the insurance risk formula; this is the formula that says how risky you are to an insurance company and thus how much you should be paying in premiums to offset that risk.

It’s important to note that your age shouldn’t affect the type of coverage you get. However, your age can and will play a role in your premium costs for that coverage.

Why do young drivers pose the highest risk (and thus have the highest rates)?

1. Inexperience

In sheer years, young drivers have had less time to practice on the road. This means they don’t have the years of experience and skills that help to intuitively avoid accidents and determine road perils in advance.

2. Underdeveloped judgment

In a similar vein, young drivers literally don’t have the capacity for judgment that seasoned drivers do. Several studies have shown that the rational part of the brain isn’t fully developed until age 25. This means that decision-making, problem-solving, and quick-thinking skills are physically absent from the young driver’s mind.

3. Distracted driving

This underdeveloped judgment has a tendency to lend itself to the “invincibility theory,” where young drivers tend to take more risks on the road because they feel they are indestructible. This includes speeding, not wearing a seatbelt, texting and driving, and driving under the influence. Research has also found a strong correlation between the number of passengers in the car and the rate of accident incidences in young drivers. 

Basically, numerous statistics and studies show that teens and young drivers tend to have more frequent, more severe accidents than drivers aged 30-29.

The good news? At age 25, your rates should drop.

But in the meantime, what can you do to offset the high cost of “under 25” auto insurance?  

How can you offset your age-related premium?

A young driver could pay up to 40% more than an experienced driver for auto insurance, even with a clean driving record. You can’t control your age and the statistics of your age group—but you can control other aspects of your risk-related premium. 

1. Know the premium formula.

Understanding the different factors that go into your premium can help you better prepare for and adjust your costs. Your insurance company will take into account other factors, besides age, when determining your premium, including:

  • Where you live
  • Driving record
  • Credit history
  • Marital status (married couples generally pay less)
  • Children (having a child makes you “more responsible” and less risky)
  • Occupation
  • Number of vehicles
  • Vehicle type, size, safety, and rating
  • Annual mileage
  • Insurance history

Even gender can play a role in some premium calculations. On average, men tend to have higher auto insurance costs than women do. In fact, the riskiest and most expensive group of drivers is 19-year old males.

2. Manage your risk.

Probability says that the more often you’re on the road, the more likely you will get into a car accident. In this way, insurance companies will always look at your driving patterns to determine what type of risk you are.

Thus, one of the easiest ways to manage your risk is by reducing your time spent in the car. You can do so by taking public transit, biking to work, driving in lower traffic areas, and carpooling.

3. Look into discounts.

To offset the higher cost of the “under 25” surge pricing, look into possible discounts that insurance companies offer. Examples include:

  • Good student discounts
  • Bundling discounts (i.e. renters and auto)
  • Employer discounts
  • Low-mileage discounts
  • Anti-theft and safety device discounts
  • Defensive driving course discounts

You’ll notice that many of this discounts come from proactively managing your risk, like installing safety devices or taking a defensive driving course.

4. Shop around.

Always compare quotes before choosing an auto insurance carrier. Different companies have different risk tolerance, and thus will offer distinct premiums and discounts to young drivers.

In fact, some companies actively go after the “under 25s” as a way to increase their target audience in a highly competitive insurance world. This means they’ll be able to offer hefty discounts and premium cuts despite your age and risk.

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5. Live at home.

You may or may not want to hear this advice. But living at home saves more money than just rent and utilities. Living in your parents’ house can also lower your auto insurance. If you live at home, you can buy family plan insurance through the same carrier for a multi-line discount. This will keep your risk-level and related costs low despite your “under 25” status.

The Bottom Line

You can breathe a sigh of relief. If you have a good driving record as a young adult, you’ll likely see your rates drop at age 25. In the meantime, manage your risks and possible discounts to lower your auto insurance premiums as much as possible.

The best way to find the greatest deal is to compare quotes and companies. Young drivers love InsuraMatch because you can get a quote in minutes from up to 8 carriers. With InsuraMatch, you’ll find the best coverage at the best price and be back on the road in no time!