For 18-24 Year Old Drivers, Car Insurance Can Be Costly, Which Is Why It’s Smart To Compare

Teen State FarmIf you recently bought a car right out of high school or college (or if you’re a family with younger drivers) you know all-too-well that car insurance prices for 18-24 year olds can be steep. In fact, they routinely are among some of the highest rates you will pay.

While car insurance prices can and will vary depending on where you live and what type of car you drive, you will typically pay more for your car insurance if you are under the age of 25 or if you’re hoping to insure a child in that age range.

When you shop for car insurance, it is important to understand how car insurance rates work and how to mitigate these costs with available car insurance discounts.

Why kids cost more

Insurance is, fundamentally, about risk and protecting or hedging against the possibility of exposure to risk. Car insurance companies set prices using a wide range of variables, but most of them have to do with the likelihood of an event taking place. That likelihood is predicated upon historical data used by professional actuaries.

Car insurance prices for 18-24 year olds are usually higher because younger drivers represent a higher risk for car insurance carriers. Younger drivers have less experience on the road and are more likely to be involved in accidents or other incidents that will generate a claim on car insurance coverage (such as traffic violations.) Insurance companies hedge against this historical and statistical reality by charging more to cover younger, inexperienced drivers.

An actual case history comparison

To show you just how different car insurance prices can be for younger drivers, we’ve developed driver profiles and took them shopping for car insurance coverage. We used the online quoting tool for the nation’s largest car insurance company (State Farm) and we went shopping in a market that represents the dead center of the country when it comes to car insurance premiums costs.

According to a number of sources (including the Insurance Research Council and the National Association of Insurance Commissioners – NAIC) the national average for annual car insurance premium in the United States for 2014 will be $1,503. The state of Kentucky is the only state with an average annual car insurance premium cost matching that figure for 2014, so we took our two driver profiles shopping for State Farm car insurance coverage in Lexington, Kentucky. Here’s what we found:

Driver profile A

Our first hypothetical driver is a 40-year old, divorced male renting a living space in an existing home in Lexington. He drives a 2012 Ford Focus 4-door sedan with less than 20,000 miles on it and has a clean driving record. He has been continuously insured as a driver since he earned his driver’s license at the age of 17. He is also willing to participate in State Farm’s drive monitoring program known as Drive Safe and Save.

The coverage package with State Farm we’re putting in place comfortably exceeds Kentucky’s legal requirements for car insurance coverage and includes the following options and limits of coverage:

  • Liability at 100/300/100 limits
  • Medical payment coverage at $10,000
  • Collision coverage with a $500 deductible
  • Comprehensive coverage with a $500 deductible
  • Uninsured/underinsured motorist coverage at 100/300 limits
  • Emergency roadside assistance coverage
  • Rental reimbursement coverage

State Farm is able to extend this driver discounts for safe driving, for driving a safe car, and for enrolling in Drive Safe and Save. The online quoted monthly premium for this driver in Kentucky clocks in at $130-$140.

Driver profile B

Our second hypothetical Kentucky driver is a 23-year old student living at home and commuting to classes, locally. He too drives a 2012 Ford Focus 4-door sedan with less than 20,000 miles on it and he completed a driver education and defensive driving course when he graduated from high school.

The Kentucky car insurance State Farm package we put in place for this driver is the same as with the older driver and includes:

  • Liability at 100/300/100 limits
  • Medical payment coverage at $10,000
  • Collision coverage with a $500 deductible
  • Comprehensive coverage with a $500 deductible
  • Uninsured/underinsured motorist coverage at 100/300 limits
  • Emergency roadside assistance coverage
  • Rental reimbursement coverage

In addition to the safe driver and safe vehicle discounts State Farm can offer our younger driver, discounts apply for his willingness to enroll in the Drive Safe and Save program as well as for the fact that he gets a discount as a good student who maintains a “B” average or better on his grades. Even with these discounts, this driver will pay State Farm $195-$205 monthly for this coverage.

(These rates were the result of online quotes from State Farm gathered in March of 2014)

Steps you all can take to save

In the younger driver profile listed above, we did not get a quote for a family that would be adding this driver (which could have extended some additional State Farm discounts to a family insuring him.) There are other steps that families with younger drivers can take to lower the cost of insuring these newer drivers.

The best way to keep your costs down is to maintain a perfect driving record. Moving violations and accidents can cause insurance rates to go up, while avoiding these types of incidents can lead to continued discounts.

In addition to discounts, you can also keep car insurance rates low by maintaining a good credit history and by limiting the amount you drive. Insurance carriers take these factors into account when determining insurance rates. Paying your other bills on time can actually affect your car insurance costs and with some carriers, paying your entire car insurance premium up-front or by using an online or automatic payment option can get you additional discounts.

Insuring a younger driver will cost you more (whether you go it alone or add a younger driver to a family or parent plan) but there are some things you can do to mitigate these added expenses. Arming yourself with the knowledge of how car insurance rates are set and taking some time to compare car insurance plans among several providers could be the first step in the process.

(Note: the insurance coverage quotes provided are for informational purposes only and should not be considered binding or promotional. The writer is not affiliated with State Farm or any of its competitors.)

Jeffrey Davidson is a writer, researcher and former sales consultant with more than 25 years of experience working with insurance companies and financial services firms. He currently writes about car insurance products and services for Reply!. You can find his article on innovative ways to lower your car insurance rates.

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