Some younger drivers pay more for their insurance than they do for their car. Why does it cost so much? Risk and uncertainty for the insurance company are the two biggest reasons for the high cost. There are many others as well, but more importantly, there are ways to be sure that you are getting the best rate. Look for some tips below.
Risk: Most insurance rates are based on statistics as companies try to match premium with risk. The higher the risk, the higher the premium needed to offset the risk. Younger drivers have the highest crash rate of any other age group. Since this increases the chances of an insurance company having to pay a claim, they must collect more premiums. Tip #1- to avoid some of this extra cost, ask your insurance carrier if they have any type of young driver program. These programs are designed to provide additional training and knowledge to young drivers and most companies will offer a discount for completing courses since it lessens the risk.
Uncertainty: When insurance companies quote a price, one of the first things they do, is look at the individual’s driving record. In doing so, they are looking for speeding tickets and other moving violations which may indicate how safe the person is as a driver. If they do not see any, they can tell that the person is a more cautious driver. Younger drivers have a limited amount of history for the insurance companies to evaluate. With this uncertainty, insurance companies must error on the side of caution by charging a higher premium.
Credit: Statistics have shown that individuals with better credit tend to file less insurance claims. For this reason, most insurance companies use certain aspects of a person’s credit to determine their rate. Young drivers are at another disadvantage in that most have not had a chance to build credit. While this is not counted against them in all cases, it certainly doesn’t help the cause. Tip #2- when shopping for insurance, be sure to include some companies that do not use credit as a rating factor. They may provide a better rate as a result.
Discount ineligibility: There are several common discounts on car insurance policies that are not available to many younger drivers. Most policies offer a discount for owning a home and an even greater discount for insuring it with them. Having more than one vehicle also provides a discount generally. Most young drivers either live with their parents or rent and only have one care. Tip #3- if living with parents, a young driver will likely get a better car insurance rate through the company that insures the home. Some companies will require at least one of the parents to be listed as a named insured on the car policy. This in fact, will also allow for a multiple car discount to be applied.