Does Car Insurance Drop at 25?

  • Post category:Insurance

Ever since the day we got our driver’s license, we’ve had to pay auto insurance. We all quickly learned that that’s not always the most economical thing. But it is a necessity. We all start looking for ways to lower the cost of the bills every month. Most of us always heard that your insurance premiums drop the older you get.

The cost of car insurance drops when you turn 25 years old. The average amount of that drop is 10%. That drop is going to be visible on your base rate. However, the amount that your bill fluctuates is going to depend upon your driving record. Also, don’t expect it to drop immediately on your birthday.

A collage of a man checking car insurance form and reading its policy and a top view of two cars, Does Car Insurance Drop At 25?

So what causes this magical money-saving event? There’s a lot more that goes into it rather than just hitting a certain age. We did the research and put it all in one place for you. Read on through our article so you can understand what causes your rates to drop.

Why do younger drivers pay more?

Put simply, younger drivers are statistically more likely to be involved in car accidents. Not only that, younger drivers are more involved in major car accidents where people are killed. In other words, the rate of fatalities is higher when drivers are younger. For insurance companies, that means they’re more likely to pay when a younger driver is behind the wheels – and the compensation is more likely to be high.

According to some studies, this isn’t just a question of lack of experience. Very young drivers – aged under 17 – are more likely to be involved in crashes, compared to older teenagers. Even with the same amount of experience (or lack of). In fact, according to the Insurance Institute for Highway Safety

In the United States, the fatal crash rate per mile driven for 16-19 year-olds is nearly 3 times the rate for drivers ages 20 and over. Risk is highest at ages 16-17.

Factors That Impact the Cost of Car Insurance

Man driving a car at the city.

We took all of the best information that we could find and boiled it down for you. These are great points to understand no matter what age you are. There are things that you can start doing right now to get better insurance rates.

Insurance rates are based on several factors, which we have listed below.

  • Driving Experience
  • Traffic Violations
  • Accidents
  • Claims History
  • Credit Score
  • Vehicle Type

Driving Experience

Years of driving experience is going to be a primary factor. By the time we reach 25 years of age, most of us have an established history of at roughly ten years. This time period can be considered a learning curve by your insurance company.

Traffic Violations

Speeding tickets can come back to haunt you, as well as any other types of traffic violations. Your insurance company will note these and use them against you when it comes to your premium. The consider violations as a potential predictor of future accidents and/or claims, which increases their risk.  The best advice we have is to be a careful driver and obey all the laws.

Accidents

Road accident caused by car crash

Accidents are a surefire way to pay a higher rate, regardless of who is at fault. The more accidents that you have, the bigger the risk you are to your insurance company. That means you’re going to pay a higher rate to compensate for your risky behavior.

Claims History

The more claims that you file throughout your driving history, the higher the rate you’re going to pay. This is any claim to your insurance company.

Credit Score

Insurance companies have to make a profit too. If you pay your bills on time, you’re going to pay a lower rate. If you have trouble paying your bills on time and your creditworthiness drops, you are going to pay a higher price.

Vehicle Type

The type of vehicle that you are insuring also plays a role in determining your rate. If you’re driving a sportscar or a lifted truck, you will be paying a higher price regardless of your age. Any vehicle type that has higher rates of risky behavior associated with it, cush as speeding in a sports car is an automatic red flag to an insurance company, as well as vehicles with a high rate of theft. If you drive an average car, you’re going to pay a lower rate.

These are not the only things that are being taken into account by insurance companies. This is just a rough breakdown of how they calculate your rate. There are things that you can do to lower your rate regardless of your age. We will cover that in a later section.

Does Your Car Insurance Go Down At 21?

The insurance rates start to drop when you hit 20 years old. By this time, you should have an established driving record; if you have been able to maintain a decent driving record and a low claims history, then your rates are going to start to drop. It does not all happen at one time. Reduction in your insurance rates is an ongoing process until you hit 25.

By How Much Does Insurance Drop At 25?

On average insurance drops 10% of your original rate by the time you turn 25 years old. This does change a little bit based on your company. Some companies offer incentives.

How Can I Lower My Car Insurance Under 25?

You can lower your insurance rates if you are under 25 years old. If you are serving in the military, most companies will give you a reduced rate policy. When you are in high school and college, most companies will offer a good student discount.

There are also defensive driving courses that, when taken, can lower your monthly premium. You can add additional safety and anti-theft devices on your vehicle. Several companies give discounts on these things.

Does Car Insurance Drop Further Later In Life?

Several factors can cause your insurance premiums to drop later on in life. When you get married, your auto insurance will typically decrease. When you buy a home, most auto insurance companies also give discounts for that. These are stability factors. Insurance companies believe that you are less likely to be a liability.

Some people marry young and have children. This will significantly reduce your auto insurance rates. One of the best things about a good student discount is that it never goes away.  If you are a parent that has carried this on your policy because of your own educational accomplishments, you are in for even deeper discounts when your children start to drive. If they maintain good grades, the discount applies to them too.

Which Age Group Pays The Most For Car Insurance?

Statistically speaking, young men between the ages of 16 and 21 years old pay the highest rates for insurance. This group is considered high-risk. Even with a good driving record, you will pay a higher premium if you fall into this age group. There are ways that you can earn better rates even if you fall into this category.

What Age Does Car Insurance Start To Drop For Females?

Auto insurance for females starts to drop at age 21. Insurance companies feel better about female drivers than they do male drivers. On average, a woman that has a good driving record is going to experience a 24% drop in premiums between the ages of 21 and 25.

Women that have reached the age of 55 years old and are still driving with a good driving record tend to pay the least amount of money for insurance premiums out of everyone. This is especially true if they have married and become homeowners.

By now, we’ve taken some of the fog away. Insurance rates do start to drop at the age of 25, but the drop is gradual. There are many factors involved. Our best advice is to keep a clean driving record. Don’t make claims with your insurance company unless you have to. If you are able to, participate in defensive driving courses and get good grades!