Insurance for new drivers includes policies for teen drivers, older drivers who are driving for the first time, immigrants and foreign nationals, and drivers with a gap in their insurance history. As The Zebra points out, new drivers often pay more for car insurance than experienced drivers because they don’t have a driver history that insurance companies can analyze. Without having a history to review, insurance companies are taking a risk when insuring new drivers.
Factors That Affect Car Insurance Rates for New Drivers
While insurance for new drivers tends to be more expensive, certain factors can cause an increase or decrease in the rates you can expect to pay. According to The Zebra, the following factors can affect insurance rates for new drivers:
- Age – Insurance companies tend to charge drivers under the age of 29 more for car insurance because that group is statistically responsible for more accidents. If you’re a new driver over the age of 30, you could end up paying slightly lower rates.
- Vehicle Make and Model – If you drive a newer and more expensive vehicle, you can expect to pay a higher insurance rate than drivers who own older or more modest vehicles. Your insurance company will also charge you more to insure a performance vehicle or an electric car.
- Credit Score – If you live in a state that allows your insurance company to factor in your credit score when calculating your premium, you can expect to see a drastic increase if your score is in the “Very Poor” tier. Insurance companies charge drivers with higher credit ratings more reasonable rates because they’re considered more financially stable.
- Gender – Insurance companies tend to charge male drivers higher rates than female drivers, even when the male driver has a clean driving record. Males are statistically riskier to insure because they are responsible for the majority of accidents, especially male drivers under 29.
- Location – If you live in an area with high rates of theft, vandalism, and uninsured drivers, you can expect to pay more for insurance.
- Mileage – If you’re always on the road, there’s a greater chance that you’ll get into an accident, making you an insurance risk. Drivers who spend less time on the road usually pay lower insurance rates.
- Type of Coverage – If you only purchase your state’s minimum requirements for liability insurance, you’ll spend less money than if you buy collision and comprehensive coverage. You might have to buy collision and comprehensive coverage if you are financing or leasing your vehicle because most lending companies require that type of coverage. When you pay off your car, you can opt out of the additional coverage.
Ways for New Drivers to Save Money on Car Insurance
Even if you’re in a demographic that tends to pay more for car insurance, you can still save money if you’re willing to do a little research. The Zebra suggests that new drivers looking to save money should do the following:
- Stay on your parents’ policy. If you’re a teen driver, it makes sense to stay on your parents’ insurance policy instead of purchasing your own car insurance. When you don’t have a driving record, insurance history, or credit history, insurance companies will charge you thousands of dollars a year because they consider you a risk. Your parents’ established history can get you much lower rates. If you’re a college student still living at home, your parents’ insurance company is likely to allow you to stay on their policy as well.
- Comparison shop. If you do have to purchase your own car insurance, you can save money by shopping around and comparing quotes. Each insurance company has its particular set of rating factors that can make a policy more expensive or more affordable than a policy from its competitors.
- Choose a less expensive vehicle. If you’re in the market for a new vehicle, choosing one that’s moderately priced can help drive down your insurance costs. A new driver with a brand-new car is a significant risk for insurance companies, especially if the car is a luxury or performance vehicle. Purchasing a slightly used vehicle with lots of safety features can save you money.
- Opt for a high deductible. Depending on what state you live in, you may only have to carry liability coverage, which doesn’t require a deductible. However, if you’re leasing or financing your vehicle, your lender may require you to buy comprehensive and collision coverage. You can save money on this type of coverage by choosing higher deductibles.
- Bundle your coverage. If you have renter’s or homeowner’s insurance, make sure to get a car insurance quote from your insurance company. Many companies offer discounts if you bundle your policies.
- Pay for your policy upfront. When you pay your policy off in monthly installments, your insurance company charges you a convenience fee on top of the premium price. If you can afford to pay for your entire premium upfront, you can save up to 10%.
Car Insurance Discounts
Car insurance companies offer all sorts of discounts that new drivers may qualify for. While these discounts aren’t likely to cut your premium in half, they can certainly drive down insurance costs for new drivers. According to NerdWallet, these are the most common discounts in the car insurance industry:
- Multi-Car Discount – If you’re a teen driver adding your car to your parents’ policy or you’re an older first-time driver adding your car to your spouse’s policy, you can qualify for a multi-car discount. This discount automatically kicks in with the addition of your vehicle.
- Good Student Discount – Many insurance companies offer good student discounts for high school and college students under the age of 25. To qualify for a good student discount, you have to maintain a 3.0-grade point average. Your insurance company will ask you to provide a transcript every six to twelve months as proof of your GPA.
- Defensive Driving Discount – Insurance companies favor drivers who take defensive driving classes because they learn safe driving habits, making them less of a risk to insure. To qualify for a defensive driving discount, you’ll have to complete a defensive driving course and provide your insurance company with a transcript or receipt.
- Safe Driver Discount – If you install a plug-in device or use a phone app to track your driving, you can qualify for a safe driver discount.
Now that you know how insurance companies calculate premiums for new drivers, you can decide which options are right for you.
Sources:
The Best Car Insurance for New Drivers
Getting Cheap Car Insurance for New Drivers
What is Comprehensive Car Insurance?
Average Car Insurance Deductible: Everything You Need to Know
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