- Statistically, you are many more times likely to have an accident than a driver over 25 is.
- You don't have a credit record. Insurance companies say folks with a bad or no credit history tend to file more claims.
- You're not a homeowner. You're not married. You're not a college graduate (yet). A lot of the discounts available in a few years just aren't in the cards right now.
- You're losing the multi-car discount. The cost of adding you and a car to a parent's policy was probably offset somewhat by a discount of 10 to 25 percent for insuring more than one car.
- Some insurers don't want to insure you. Many won't touch drivers under age 25 -- but many others will.
- You're considered previously insured. That's a plus that will greatly lower what you pay.
- You may have a couple of years of experience under your belt, which means the very worst of the age penalty is behind you.
- Your previous good driving record applies toward a good driver discount. Most companies require at least three years of accident-free driving for this break of 10 to 25 percent.
- Depending on the insurer, your previous coverage may qualify you for legacy discounts -- for insuring with the same company your parents did -- or transfer discounts, given to previously insured drivers who buy a new policy at a different company.
Decide how much insurance you needHow much insurance you need depends on a lot of factors including how much you owe and own, how much your assets are worth, whether you have dependents, and how much out-of-pocket cost you could afford to bear. You can estimate your coverage needs using auto insurance calculators or worksheets available on-line.
- At a minimum you need state-required liability insurance to drive legally.
- Buy additional liability insurance if you have savings or a house that could be a target in a lawsuit if you are at fault in an accident. Anything insurance doesn't pay, you do.
- Buy comprehensive and collision if you owe money on your vehicle or if you could not easily replace it.
Comparison shopNo matter what type of insurance you're buying, the process is essentially the same. Once you've decided what type of insurance and how much coverage you need, you can begin comparing quotes from insurance companies online, directly by phone, or through an insurance agent or broker. Get quotes from several different insurers because premium cost can vary widely, often by thousands of dollars if you are very young.
But compare the coverage offered, too. A policy might cost less because it offers fewer, or different, features and benefits. And make sure the company you've settled on is reputable, with good customer service and claims-paying ability. All insurance companies are rated by major rating agencies (e.g. Standard & Poor's, Moody's, A.M. Best) on their ability to pay claims. You can access these ratings online, through public libraries, or through car insurance company literature.See " 5 reasons to compare auto insurance quotes online."
Understand what you're buyingAn insurance policy is a legal contract that may be loaded with technical terms that are hard to understand. But read it anyway before you sign on the dotted line to find out about the coverage you're buying. For instance, the policy will tell you:
- Who or what is covered
- What coverage exclusions and limitations apply
- When coverage begins and ends
- How much coverage is provided
- How much you'll pay for coverage (the premium)
- How you report a loss or file a claim
Evaluate your insurance needs periodicallyAs your life changes, your insurance needs change, too. So every once in a while (annually, some experts suggest), review your insurance to see if you need more (or less) coverage or an additional type of coverage. Here are some times in your life when you'll definitely want to re-evaluate your insurance needs:
- You're getting married or divorced
- You're starting a family
- You're renting an apartment
- You're buying a house or a car, or making a major purchase
- Your child is going off to college
- You're starting a new job or becoming self-employed
- You're buying or selling a business
- Your income increases or decreases substantially
- You're taking care of an aging parent
- You're retiring
Time and a clean record work wonders
Insurance.com compared rates for Mike in Vancouver, Washington, starting at age 18 with a paid-off car and liability insurance only, through college graduation and a new car with full coverage, all the way to age 30. We're assuming Mike was previously insured on a parent's policy, stays single and rents the whole time, keeps a clean record and comparison-shops every year to find the best deal - in this 13-year-span, the lowest rate came from three different carriers.Age and annual rate (changes in vehicle, coverage, driver profile)
- 18: $2,928 (8-year-old Honda Accord LX, owned, 50/100 liability only, student)
- 19: $2,414
- 20: $1,716
- 21: $1,692
- 22: $1,464 (College graduate and commutes 12 miles each way to work)
- 23: $1,296
- 24: $1,224
- 25: $1,116
- 26: $1,488 (New Honda Accord LX, financed with $500 deductibles on comprehensive and collision)
- 27: $1,392 (1-year-old car)
- 28: $1,332 (2-year-old car)
- 29: $1,284 (3-year-old car)
- 30: $1,248 (4-year-old car)