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Auto InsuranceUpdated Mar 28, 2024
5-min read
Written byJeff Gitlen, CEPF®
Written byJeff Gitlen, CEPF®
Expertise:Student loans, personal loans, home loans, insurance, credit cards
Jeff Gitlen, CEPF®, is the director of content operations at LendEDU. He graduated from the Alfred Lerner College of Business and Economics at the University of Delaware.
Learn more about Jeff Gitlen, CEPF®
In most states, car insurance is mandatory. Each state has different requirements for the level of car insurance required, but almost every driver in the U.S. needs some form of coverage.
The cost of car insurance varies significantly since it’s based on a number of factors, such as location, the type of car you drive, and your age.
Teenagers, as new drivers, generally pay the most for car insurance. For a 16-year-old with his or her own policy, the average cost of insurance can be as much as $6,930 per year for full coverage, according to CarInsurance.com. Older Americans, with increasing health problems and slower reflexes, also tend to pay more. Drivers age 75 and older can pay several hundred dollars more a year than drivers in their 30s and 40s.
- Average Car Insurance Rates by Age
- Why Teens and Seniors Pay More
- Other Factors That Affect Car Insurance Costs
- How to Save on Auto Insurance
Average Car Insurance Rates by Age
Age is one of the biggest factors driving the cost of car insurance. Generally, young drivers pay more for insurance, then costs decrease until your 60s, when your rates might again increase.
As a general rule, premiums are highest between the age of 16 and 24, with the average costs ranging from $6,930 per year at age 16 to $2,516 per year at age 21. At age 25, average insurance rates sharply decrease – dropping to $1,745 per year – and steadily decline as you get older. At 55, the average cost of car insurance is $1,363 per year. Then, car insurance premiums start slowly creeping up to $1,402 at age 65, and $1,651 at age 75, according to CarInsurance.com.
While these rates likely won’t reach the same levels as the average rates for teenagers, they do increase significantly with older age to about as high as they are for a 25-year-old driver.
Why Teens and Seniors Pay More
Car insurance is more expensive for teenagers and older Americans because the statistics show that those drivers are more likely than other age groups to get into car accidents.
Drivers between the ages of 16 to 19 are three times more likely to be in a car accident than older drivers, according to the Insurance Institute for Highway Safety.
Drivers between the ages of 15 and 20 only account for 7 percent of all licensed drivers, but they were responsible for 10 percent of all fatal accidents. So insurance companies view teenagers as a bigger risk — and charge more to insure them as a result.
For older drivers, the simple fact of aging is likely behind many accidents. This demographic has poorer eyesight and slower reflexes, which impacts their driving ability. As a result, insurers often charge drivers age 70 or older about as much as they would charge a driver who is 25.
>> Read More:Best Car Insurance for Teens
Other Factors That Affect Car Insurance Costs
Of course, there are other factors that impact car insurance rates beyond age. Generally, young men have higher accident rates than young women, so their insurance rates tend to be higher.
- Marital status:Statistics have shown that married people have fewer accidents than single people, leading many insurance companies to offer lower rates to married drivers, particularly younger men.
- Where you live:If you are in a densely populated area with lots of cars, your risk of being in an accident is higher. Similarly, if you live in a location with bad weather, such as frequent snow, insurance rates might be higher to account for that risk.
- Credit score: People with lower credit scores might also pay higher premiums. Insurance companies may also charge people more or less based on their professions. Delivery drivers may be charged extra since they are on the road frequently, while people who are perceived to be more careful, such as police officers, are often given a lower rate.
- Type of car: The age of your car, its size, and safety rating all play a role. Generally, the safer your car is, the lower your insurance premiums will be. In addition, larger vehicles tend to have lower insurance rates, as will vehicles that are less likely to be stolen.
- Driving history: If you have a history of speeding tickets or other driving infractions like driving under the influence charges, your insurance premium will be higher. In addition, if you drive your car frequently, such as to commute to work daily, you will generally pay more for insurance.
How to Save on Auto Insurance
Whether you are a teenage driver, an elderly driver, or a driver of any other age, you can save money on the best auto insurance policies. One of the most effective ways tosave money on insuranceis to shop around.
Drivers should also check with their insurance companies about discounts on car insurance policies. For example, teens might be able to get up to 10 percent off by taking driver’s education classes or by getting good grades in school. Seniors may be able to get discounts from their insurance company for being safe drivers or for taking defensive driving classes.
Finally, for teen drivers, the high cost of insurance can be reduced significantly by joining your parents’ car insurance plan. Typically, your insurance premium on their plan will be approximately half of what it would be if you purchased your own insurance. However, your parents’ premium will rise, so be sure to discuss the pros and cons with them.
Bottom Line
While car insurance can be pricey for some age groups, it is a necessity for most drivers in the United States. But by employing some price-saving strategies, such as comparison shopping and searching for discounts, you can get a far better deal on your insurance.
