New Drivers, especially young drivers, are subject to some of the highest auto insurance rates. This is primarily due to the higher probability of an accident based on the statistics for that age group.
The typical new driver would be a teen driver getting their first driver’s license. Other new drivers would include older adults who did not previously have a license and new immigrants.
Regardless of the category, there are a number of things you can do to get a lower rates on car insurance.
Ways to Reduce your Car Insurance Premiums
Request a good Student Discount: Most auto insurers will offer a discount for good students if you provide evidence to the insurer that you have good grades, typically by maintaining at least a “B average” or better. The logic is that better students are often more responsible drivers too.
Take a Defensive Driving Course: Insurers will often provide a discount for a driver that has attended an approved defensive driving class. This type of class helps to make you a safe driver which reduces the risk for the insurance company.
Drive an inexpensive car: A significant component of your insurance coverage is to protect the value of your vehicle. If you have an expense sports car, for example, you are going to pay a lot more in collision and comprehensive coverage than someone who is driving an inexpensive car.
Driving older vehicles with higher mileage can reduce your insurance costs quite a bit because they have low residual value. Some people actually drop the collision and comprehensive altogether if the value of the car is low enough that the payback in premiums for that portion of coverage is short.
For example, if your older car is worth $1,200 and the insurance company is charging $400 per year in premiums for collision coverage, the payback is 3 years. It is actually better than that because you would have a deductible which means for a $1,200 loss you would only get paid back the value less the deductible. Many are willing to take this risk and pocket the $400 per year in their own savings account instead of handing it over in premiums.
Request a low mileage discount: Often as part of the insurance underwriting process, your insurer will ask how many miles you typically drive per day. Regardless, If you are putting on relatively few miles, make sure your insurer is aware of it. Be sure to ask if there is a low mileage discount. If you don’t ask, you don’t get!
Speaking of low mileage, if you are out of town at school or traveling for an extended period, you should ask your insurance agent for a discount as there will be no mileage being put on the vehicle.
Some people will even suspend coverage during that time. Be careful. Suspending coverage can be dangerous if you forget to enable coverage again or if there happens to be a an unexpected event where insurance would be needed. An example would be that somehow your car is damaged while you suspended coverage due to being out of town at school.
Other Ways to Save
Ask for a Security Discount if you park your car in a secure parking garage. There may also be discounts if your car has additional security features. A secure vehicle is less likely to be stolen, which reduces the claims risk to the insurer. If the agent does not ask, be sure to tell her about any safety features of the vehicle and ask if an additional discount is available.
Speaking of safety, it’s a good idea to check to make sure your car doesn’t have any unrepaired safety recalls. You can quickly find this out for any vehicle by going to this US Department of Transportation site.
Requesting a Higher deductible is one of the better ways to reduce your auto insurance premiums. You can do the math to see what the payback is going to be based on what the agent quotes you for the premiums relative to the different deductible levels. I often get the highest deductible allowed. My philosophy is to pocket the premium savings and put it in my own account to “self insure” for any future claims. You must be prepared to pay the deductible should you have a claim, so choose carefully based on what you are comfortable covering.
Bundling your insurance can also save auto insurance costs by what is also called a multi-policy discount. For example, if you have your homeowners or renters insurance with one company but your auto insurance with another, you may be paying more in total premiums than if they were both “bundled” with the same insurance company. Insurance companies will often cut their rates a little to earn all of your business.
This concept includes a multi-car discount as well. If you have multiple vehicles, you will often benefit by have more cars with the same insurer. Most people have the same company out of convenience, but sometimes due to circumstances you can end up with different companies.
Getting multiple quotes is one of the most important things you can do to get the best rates for auto insurance. This should be done at least every other year. This is how you keep your insurance company honest and avoid the loyalty penalty.
By regularly comparing rates from different insurance companies you will make sure you are getting a fair price. This applies to adding new drivers as well, as the rates can vary quite a bit between insurers at times. Having the information can only help you.
A good time to get quotes would be around your annual renewal time. If you like your current insurance provider, you can often get them to reduce their rates to “match” a quote that you present to them from a competitor. Often the conversation is “I like you and your company, but I have a household budget to maintain. Are you able to match this quote that I received from this other company so I can stay with you rather than switching?” This has worked for me and can work for you too.
Keep in mind that premiums are only one part of the equation. What ultimately matters is how that insurer treats you when you have an insurance claim. Low premiums are worthless if the company is going to fight you and treat you unfairly when you actually have a claim. In other words, you want the best value you can get. This would be the best premium for the expected coverage. You can check out the claims ratings of many auto insurers at this site.
Even More Ways to Save
Improving your credit score will often lower your insurance premiums. Most insurers use your credit score as part of their underwriting criteria. Those with good credit often get preferred rates. This is something you want to start as early as possible since it takes time to improve your score. A young driver could be added to your credit cards as an additional user. This can help them improve their credit score. To learn more about improving your credit score, check out this article.
Driving Habits Tracking Tools may also get you a discount, depending on the insurance company. This would be a GPS type device on the car that monitors your driving habits. Hard breaking, jackrabbit starts, and wild turns hurt your score. Slow and steady driving improves your score. These types of devices make you a better driver. This in turn can save you money in premiums and the insurance company by lowering claims.
Usage-Based Insurance is a new trend in auto insurance. This works by you installing a telematics device or using an App that tracks your mileage. Basically you pay based upon how much you use the car (ie: per mile), rather than a fixed rate. This can be a big savings for drivers that don’t put on much mileage. If this is you, see if this is available in your area.
Many affiliate Groups can qualify you for an auto insurance discount. For example, if you are a member of a business group, alumni group, AAA, military group, or others, you may qualify for an additional discount. Sometimes those groups will have an affiliation with one insurance company that gets you a discount. For example, if you are a warehouse club member such as Costco, they will often partner with an insurer to get you a discount by being a warehouse club member.
Be sure to ask your insurance agent what group discounts are available. Also be aware of what discounts are offered by groups that you are a member of.
Defer getting your license. This is not what you wanted to hear, but if the cost of car insurance is just too prohibitive to your household budget, you may have to wait a year or two. Getting your license at age 16 is great, but many wait until age 18 or even longer these days. The cost is one of the factors. You made it this long, you can probably make another year or two without a license. Once you get a quote for insurance with all the applicable discounts, you will be in better shape to make this hard decision if necessary.
Be sure to ask your insurance agent about what other discounts are available. There may be unusual discounts available that you were not aware of. Your agent should take the time to explain them to you. Remember, if you don’t ask you don’t get!
Executive Summary: How to Save Money on Car Insurance for a New Driver
- Insurance rates can be quite high for new drivers, especially teenage drivers
- Taking a defensive driving class and getting good grades can get you premium discounts at many insurers
- Driving an inexpensive car can save you quite a bit in premiums
- Raising your deductible is another way to cut your premium costs if you are comfortable with the additional risk
- If you don’t drive a lot, getting low-mileage discounts or switching to Usage-Based Insurance could be a good move
- Bundling your other insurance with your auto coverage can also reduce your rates
- Getting multiple quotes from different car insurance companies is one of the best ways to save
- Having a Driving Habits Tracking tool can improve your driving and save you money too
- Be mindful of your credit score, as many insurers use your score as part of the underwriting process
- It is a good idea to ask your agent about other discounts, including being part of an affiliate group that could also save you as well
- If the costs just will not work with your budget, you might consider deferring getting your license for a year or so to pocket the savings knowing that rates usually drop as you get older.
