Why is car insurance for new drivers so expensive?

Car insurance for new drivers is so expensive because car insurance companies consider them high-risk drivers. New drivers have little-to-no experience on the road, and the odds of them getting into an accident and filing a claim are statistically higher. Reduce the cost of auto insurance for new drivers by taking a defensive driving course, adding them to an existing policy, or by comparison shopping online to find the cheapest rates from local companies.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Oct 31, 2020

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While getting a driver’s license is an exciting time in anyone’s life, there are a lot of responsibilities and expenses that accompany this achievement. This includes car insurance. Since you’re a new driver, you’ll find that insurance companies charge more because inexperienced drivers statistically have more accidents.

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Whether you’re a teenager getting your first taste of mobility and independence or you’re older first time driver, the insurance company is going to charge you more because you don’t have much driving experience. While there are justified reasons for higher rates, there are some practical ways to lessen the cost.

New Drivers Have More Accidents

While many young people resent the generalization that teenaged drivers are dangerous drivers, the statistics are hard to argue. Drivers in the 16 to 20 age group are involved in more accidents than any other age group. This is especially true of young men in that age group.

According to the California Department of Motor Vehicles, 16 to 19 year olds are 2.7 times more likely to be involved in a crash that results in an injury or fatality than any other age group. Sixteen year olds are 3.7 times more likely.

Over half the tickets to young drivers in this age group are for speeding. Because speed is also an indicator for an increased risk of traffic accidents, this is yet another reason new drivers are considered a higher risk group to insurance companies.

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Reasons New Drivers Have More Accidents

There’s no substitute for experience. This is especially true when it comes to driving. Because there are so many variables that occur when driving there’s no way any driver’s education class can prepare a driver for them all.

In addition, driving is one of the most complicated things a person will ever do. There is so much data bombarding a driver at once, the weather, other drivers, construction, what the car is doing, distractions from other occupants that it takes practice to be able to process it all.

Teen drivers also have a higher tendency to participate in risky behavior.

They often don’t wear seat belts and speed. Teenagers have not learned to drive with patience. This causes them to do things like tail gating, running red lights, speeding, and slowing down for inclement weather.

They also don’t have the ability to make proper judgments about potential hazards. It takes time for new drivers of any age to develop the skills to deal with unusual situations. It’s a definite catch-22 situation since there’s no way for drivers to get that experience except to drive.

How Insurance Companies Determine Premiums

When insurers determine the amount they charge any driver for insurance, there are several factors they take into account. None of them favors young, new drivers.

The National Association of Insurance Commissioners says the first two factors they take into account are the applicant’s driving record and credit history.

Since brand new drivers have no driving record, there’s nothing to prove to the insurance company that they are safe drivers. Teens usually don’t have a credit history either.

Married people, because they are more settled and generally considered to be more responsible, have lower premiums than single people do do. Obviously most teens are single. Young men are the most likely to be in an accident than anyone else, so men usually pay higher premiums until they turn 25.

Of course, some of the factors that companies use don’t have anything to do with the individual. People who live in cities pay higher premiums than people who live in rural environments. This has more to do with just the higher number of cars in an urban area.

The type of vehicle also has a lot to do with it. While many teens love to drive sports cars, they are the most expensive vehicle for anyone to drive from an insurance premium standpoint. Any two-door coupe is considered a sports car and the owner is charged accordingly.

Since sports cars are designed to go fast, insurance companies work on the assumption that people who buy sports cars at any age are doing so to use that speed.

Since speed and an inexperienced driver are a deadly combination, insurance premiums on teens with sports cars are extremely high, even more so if the driver is male.

Driving Without Insurance is Illegal

When faced with high premiums, it is tempting for teens or their parents to try to get away without insurance. However, not only is this illegal, it is also a very poor decision financially.

Though it may seem to save hundreds of dollars in premiums, a teen driving without insurance can get into a lot of trouble with the law. Depending on the state in which you live, you can get an expensive ticket and a big mark on your driving record. This will make buying insurance even more expensive for the next several years.

In some states, they can impound your car if you are caught driving without insurance. This can cost the parents hundreds of dollars to get their car back. Depending on the laws in your state, the parents could also get a ticket.

The problem is even worse if the teen is in a wreck. Some parents don’t add their young teen drivers to their insurance policy because they think that since their policy allows them to loan their car to other drivers, they can “loan” the car to their child.

However, insurance companies specifically state that all drivers in the household must be on the policy if they don’t have their own insurance or they won’t be covered. If you deliberately leave a driver off, your insurance company can and probably will decline to pay for damages your teen causes. Not only are they perfectly within their rights to do so, they can also cancel your coverage or raise your premiums for violating the terms of your policy.

For more information about driving without coverage, visit the Insurance Information Institute’s website.

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Ways Teens Can Save on Insurance

In order to get a good discount of your own, work to keep your grades up. Most insurance companies give a good student discount to student drivers who make As and Bs.

Even if you aren’t legally required to take a driver’s education course in order to get a license in your state, take one. Older new drivers can still take a driver’s education class. Insurance companies will usually give you a discount if you’ve completed one.

Perhaps the thing you can control the most is the type of car you drive. As mentioned earlier, any two-door car is going to be more expensive to insure than any other type of car. If you drive a car that still has an outstanding car loan, your lender will require that you carry comprehensive and collision on it. This will substantially raise the amount of the premium.

The least expensive vehicle for a teen is an older model sedan or SUV that does not require comp and collision, or if you do carry comp and collision on it, would be inexpensive to repair. Even in older vehicles, you can find safety features that will also help to bring down the premiums as they can save on medical expenses.

Ways Anyone Can Save on Car Insurance

Even if you’ve been driving for years, car insurance can be expensive. While there’s no way for drivers to do without it, there are many ways even experienced drivers can save on car insurance.

An easy way to save is to get as much of your insurance from one company as possible. If you have homeowners or renters insurance with a different company than your car insurance, you are missing out on some big discounts. Not only can this save you on the car insurance, but also the property insurance.

Don’t forget about things like boats, RVs, or motorcycles. Some companies even offer life insurance. The more you insure with a single company, the more you can save on them all.

Just as teenagers can benefit from driving a certain kind of vehicle, all drivers who want to save on car insurance should take insurance costs into consideration when they purchase a car. Insurance companies will gladly give you quotes for certain vehicles with no obligation. This can give you a good idea how much a certain vehicle will affect your premiums.

While comp and collision are required by the terms of a car loan, the amount of the deductible is not. The higher the deductible you choose, the lower the premiums will be. Keep in mind that since a deductible must usually be paid before the insurance company will pay for the rest of the repairs; always keep the full amount of the deductible in a savings account to be ready in case of emergency.

Finally, not all insurance companies are the same. They compute premiums differently and often give different discount amounts. Just as you shop around before buying a car, always shop around before buying car insurance. The Texas Department of Insurance even illustrates how you can save $100 in just an hour by reviewing your coverage and shopping around.

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