If you’re like most young adults, your car is number two or three on your list in terms of where your money’s going. Depending on where you live and what type of car you drive, it may even be number one when you add in gas, maintenance, and car insurance. Since you have no control over the cost of gas and maintenance, you are left with insurance as your best option for finding some savings.
Facts and Figures
Car insurance rates are the highest for teens and beginners, with average annual costs of insurance at $8,226 and $6,456 for 16- and 18-year-olds, respectively. The biggest decrease you’ll ever see comes when you turn 21 and rates are cut in half, to $3,620 on average.
You’ll see another drop at age 25, to $2,374, then smaller decreases each year until you are 60 and rates start climbing again. For millennials, that means average monthly bills of $300-plus in your early 20s and $200-plus in your later 20s.
All states mandate that drivers carry insurance, but many feel they simply can’t afford it. They would rather run the risk of being fined $500 or more if they are caught. The industry estimates that 16 percent of drivers at any time are driving without insurance, which is ironic because uninsured motorists are one of the causes of higher premiums.
Types of Discounts Available
Since you can’t?and don’t want to?age any faster, here are some things young drivers can do to save on car insurance.
- Bundle policies: If you’re lucky enough to own a home in your 20s, that’s awesome. You may qualify for a discount just for that reason. If not, most companies offer discounts for bundling all your policies with them. If you don’t own a home, young couples can save by having both their cars covered by the same insurer.
- Anti-theft system: A simple gas boot may not qualify, but an electronic security system will.
- Newer and “green” vehicles: Newer-model cars are less likely to break down and they also include updated safety features. “Green” vehicles such as hybrids and those that use alternative fuels also qualify at some companies.
- Safe driver: The longer you remain accident- or claim-free, the more you save. Taking a defensive driving class may also earn you discounts at some companies.
- Low mileage: The less you drive, the higher your safety rating.
- Military service: Automatic discount at most agencies; don’t forget to mention it.
- Pay in advance: Paying for everything up front instead of breaking it into monthly payments earns you a discount with most carriers. If the discount is worth it, ask to borrow money from the “bank of mom and dad” and make monthly payments to them.
- Electronic billing: Sign up for electronic bill pay and save.
- Loyalty: If you’ve had the same insurer for a few years, you may qualify for a loyalty discount.
- Early bird bonus: Just like cell phone service companies, some insurers will pay you to switch, as long as you do so well in advance of the expiration of your current policy.
It’s only smart to compare discounts among a variety of companies. You can do that through an Internet service such as www.carinsurancecheap.net. Sites like this send your request to several car insurance companies and you just sit back and watch the quotes come in. If you see a quote you like, you can follow up.
Several carriers now offer insurance based on how you drive. Basically, the carrier installs a small electronic device that transmits information about how fast you drive, how hard you brake and where and when you drive, or what times of the day you’re driving. This gives them a snapshot of what kind of driver you are and the risks you take and they use that information to give you a quote. Be honest with yourself about what type of driver you are; if you opt for this program, it could backfire and actually increase your rate.
Since car insurance is likely one of your biggest expenses, it makes sense to shop around. Make sure you ask about any discounts you may qualify for, too. The money you save may be the difference between a tight budget and one that allows you a little breathing room.