Does age affect car insurance rates?

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In a nutshell...
  • Insurance companies use your personal information to determine how much to charge you for auto insurance
  • Every driver in the household will have an effect on rates but the primary driver has the biggest effect
  • Two of the factors that you can’t control that are used to set your rate is your age and gender

Your age doesn’t affect how much you’ll pay for consumer goods but it can impact how much you pay for several different types of insurance.

When you shop for health insurance, life insurance, and disability insurance, your date of birth is used to assess how healthy you are.

Using your age to set your premiums is a simple and universal way for the carrier to determine how likely you are to file a claim.

It’s easy to understand what age has to do with health and life insurance but it can be a bit perplexing to learn that age is also used to set your auto insurance premiums.

Morbidity and mortality have nothing to do with auto insurance but that doesn’t mean that falling into a certain segment doesn’t make you more likely to have an accident.

Make sure you’re not overpaying for car insurance. Enter your zip code into our free comparison tool today!

Insurance Companies Must Assess Risk

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When insurance companies use rating factors to set your household’s rate, each rating factor affects risk.

You are either going to be considered riskier or less risky depending on the claims data that’s been reported.

Anytime a driver falls into a riskier classification, the insurer must charge higher premiums to balance the risk. This method is used to ensure that the insurer will be able to stay profitable.

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Beware of Premiums That Seem Too Good to Be True

Premiums aren’t just pulled out of thin air. A lot of research and number crunching goes into setting premiums.

First, the actuaries must settle on a base rate and then a value must be placed on each rating factor to see how much it will drive the cost of a unit of insurance up or down.

If the insurance company is new to the industry or they have an unrecognizable name, you should do your research before being tempted by extremely low rate quotes.

It is nice to get a deal when you’re young and you fall into a high-risk class, but it could put you at risk of having losses that aren’t covered if you choose an insurer that uses bad faith tactics.

How can you check a company’s financial strength?

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When you’re getting several rate quotes all at once and one of the quotes is substantially lower than the rest, you should check to see if the company is in good financial health.

All publicly traded companies have letter grades for financial stability. Most grading systems assign companies an A+, A, B, or C depending on their financial reports.

The easiest way to assess the financial strength of the company is to reference their grades through sites like A.M. Best or Moody’s.

If that company is not collecting enough money from you to cover the risk that you present, they probably are losing money whenever they clients file claims.

What does age have to do with risk?

Anyone at any age can get into an accident. It doesn’t matter if you’re 17 and newly licensed or you’re 45 and very experienced, you could easily have a bad day and get into a crash.

Even though the possibility is present, insurers use probability over the possibility.

When it comes to age, claims data and driving records show that younger drivers with little experience get into more accidents and are issued more traffic citations.

Since the data shows that drivers in a younger age group will file claims sooner than drivers who have been driving longer, there’s more risk for drivers in younger age groups.

How much more will inexperienced drivers pay?

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If you are between the ages of 16 and 19, you will pay the highest rate out of all drivers except for those who are 80 and older.

How much more you’ll pay depends on other rating information on the policy, the vehicle being operated, and also the coverage that’s carried on the car.

According to data collected, adding a teen driver to an already existing policy will increase the parents’ rate by an average of 79 percent.

The increase for male drivers is around 92 percent and the increase for female drivers is around 67 percent.

In some states, these rate surcharges could be even higher when the department of insurance allows higher age-related premium inflation.

When do you get a break on your premiums?

Age can work against you but it can also work in your favor. As you drive and you get more experience, you can show insurers that you are a safe driver by keeping your record clean.

As long as you don’t have tons of accidents and tickets, you’ll be eligible for a break on your premiums after you accumulate nine years of licensing experience.

If you rack up the years of experience without having claims, you could qualify for a Claims Free or Good Driver Discount.

Some companies also offer Ticket-Free Discounts that could help you reduce your auto insurance budget.

How to Keep Your Premiums Low When Age Affects Your Rates

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There are still ways for young drivers to find deals on their insurance. The best bet would be to drive an inexpensive vehicle that doesn’t require full coverage for the first few years that you are driving.

Here are some other money-saving tips:

  • Carry high deductibles if you need full coverage
  • Get good grades for Good Student Discounts
  • Take driver training for optional discounts
  • Take traffic school if you get a ticket
  • Shop around for low-priced insurance

If you want to shop around for the best auto insurance rates, your best option would be to use an online quoting tool. This tool will help you find a cheap quote from a respected carrier without contacting agents directly.

Enter your zip code below into our quoting tool and get started today.

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