If you are under 25 and own a car or are planning to buy one soon, you should know (if you don’t already) that your state will require liability insurance before they will allow you to register your car and get a tag.
Since your liability premium is a large part of your total insurance policy package, living in a state with high minimum limits is going to impact your insurance cost right out of the gate. For example, if you live in Florida, your minimum liability limits for personal liability is $10,000 per person and $20,000 per accident. Florida is one of the lowest minimum liability states but, they are also a no-fault state and require every auto owner to carry Personal Injury Protection (PIP).
Maine, however, requires every auto owner to carry $50,000 per person and $100,000 per accident, and they require the auto owner to carry Uninsured/Underinsured motorist coverage as well.
Certainly, many other factors can impact your car insurance when you are under 25 and we will discuss them a little later.
What Coverages do I have to Carry?
Car insurance is a package deal but the good news is you do not have to buy everything in the package. For example, if you own an older vehicle that is paid for you can elect not to carry comprehensive or collision insurance which can be very expensive for young drivers. You can also elect not to purchase optional coverages like towing and rental coverage whether your car is financed or not.Here are the coverages that are typically available in an auto insurance policy:
|Bodily Injury Liability||Pays for injuries to other drivers or passengers in an at-fault accident subject to the limits in the policy.|
|Property Damage Liability||Pays for repairs or replacement of another person's vehicle or property during an at-fault accident subject to the limits of the policy.|
|Medical Payments||Medical Payments covers medical expenses for you and other passengers in your vehicle in an accident no matter who's at fault. This coverage will even cover you for injuries sustained in another person's vehicle or as a pedestrian up to the limit in the policy.|
|Personal Injury Protection (PIP)||PIP covers the driver, all passengers, or a pedestrian involved in an accident no matter who's at fault. PIP helps pay for medical expenses, lost wages, loss of services, and funeral expenses up to the policy limits. This coverage is typically mandatory in "no-fault" states.|
|Uninsured/Underinsured Motorist||Uninsured/Underinsured motorist covers your medical expenses if the other driver (at-fault) is uninsured or underinsured. Some states also allow uninsured/underinsured property damage that covers your vehicle as well.|
|Comprehensive Coverage||Comprehensive coverage pays to repair or replace your vehicle after a non-collision event such as fire, vandalism, theft, or acts of nature subject to your deductible.|
|Collision Coverage||Collision coverage pays to repair or replace your vehicle after an accident that involves another vehicle or object subject to your deductible.
|Emergency Roadside Assistance||Roadside assistance is available if you are locked out of your vehicle or required roadside assistance like a tire change or fuel for an empty tank. Your coverage for each event is subject to the limit you purchased on your policy.|
|Rental Reimbursement||Rental reimbursement helps pay for rental expenses if you are in an at-fault accident or
hit by an uninsured driver. Most policies will have a limit per-day and per-accident.
What other Factors can Impact My Car Insurance Rates?
Just like life and health insurance, your car insurance company will go through an underwriting process to determine your rates. This means they’ll want information about you and any other drivers you’ll list on the policy, and they’ll want information about your car(s):
- Age of driver(s)
- Gender of the driver(s)
- Marital status
- The average number of miles you’ll drive each year
- Where your car is garaged and where you live
- How you use your car (personal, commuting, or business use)
- The year, make, and model of your car(s)
Why are Underwriting Factors so Important?
If insurance companies do anything right to help them compete, they gather data. Actuaries comb through tons of data about everything that has to do with the risk that insurance companies must consider before they offer a policy for sale.
The age of a driver
Insurers know that young drivers will have less experience operating a car in all kinds of traffic and that they will be less prepared than an experienced driver to deal with all the events that can go wrong while a young driver is behind the wheel. Naturally, the rates will be higher for inexperienced drivers.
The gender of a driver
Historically, female drivers are involved in fewer at-fault accidents and because of this, a female driver’s rates are going to be somewhat lower than a male’s rates.
Where you live
The insurance companies will always consider the data that’s available for the geographical area you live in. For example, they will consider the population of your area, the number of vehicles that are registered, and also the theft rates for vehicles in your area. Additionally, insurance companies are more concerned about insured vehicles being parked in an open lot than those that are garaged or in a gated community.
Annual miles driven
Data supports that the more time a vehicle spends on the road, the higher the risk for an accident. For this reason, a person who typically drives less than 10,000 miles per year will pay a lower rate than a driver who drives 30,000 miles per year. The insurance term for this is “exposure.”
Although most insurance companies will exclude coverage on a vehicle used for commercial purposes, many will allow coverage for business use. Typical business use is a vehicle used for sales calls, real estate agents, and other business purposes where you might have a client or two in your vehicle. In these cases, the insurance company’s liability exposure is increased so they’re likely to charge more premium for your liability coverage.
The year, make, and model of your vehicle can have a substantial impact on your insurance rates, both liability and physical damage coverages. For example, older model vehicles don’t have the new safety features that can protect you and your passengers and therefore your liability exposure is higher.
Additionally, since your comprehensive and collision coverage protects the car, the value of your vehicle will have a considerable impact on your rates since the company must pay for repairs or replacement using the actual cash value of your vehicle at the time of your claim.
Best Car Insurance Companies for People under 25
Since you now know all the different factors that can affect your car insurance rates, the best car insurance companies for drivers under 25 is difficult to determine without the underwriting information used to establish final insurance rates. We can offer, however, a list of five insurance companies who appear to be more “young driver-friendly” than others by considering average drivers under 25:
|Rank||Insurance Company||Average Premium|
Please note that the insurance rates listed-above will probably not be the same for you. Remember, many factors determine your rates. You may, however, start your search for car insurance with GEICO or Progressive since they appear to be the most “young driver-friendly.”
What can I do to Get the Best Car Insurance since I’m under 25?
With car insurance rates, it’s all about the discounts. When you go online or speak with an agent, make certain you discuss the discounts that may be available so you can qualify for them and save significant money on your car insurance.
The most popular discounts that we have found from the top-rated insurance companies are:
- Safe Driver
- Claim Free
- Good Student
- Snapshot (Progressive)
- New Customer
- Driver Training Certificate
For example, with many companies, the pay-in-full discount is up to 20%. That’s certainly a legitimate excuse for using your credit card to purchase car insurance.