Does being retired affect car insurance?

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In a nutshell...
  • Insurers use a variety of factors to assess any driver’s risk
  • Retirement can lower your premiums if you now drive for pleasure rather than for work
  • Age can affect insurance rates in several ways; you can receive senior discounts or pay a higher premium as an elderly driver
  • Lowering your annual mileage estimate can help to cut costs

Retirement can be a major change in life. After years on the job, you’re looking forward to relaxation, a slower pace, and new adventures.

Part of retirement planning includes determining future monthly expenses and the impact made by retiring from the workplace. Some monthly bills, like those for housing or mobile service, are stable and unlikely to be affected.

However, other expenses, including your car insurance bill, could be impacted by your retirement decision.

Depending on your age at retirement and the amount that you used your car for work, you could see real savings on your car insurance premiums. Different insurers may offer different options.

To make sure that you’re making the most of your insurance premium, compare the offers and quotes available online from many car insurance companies. Enter your zip code into our free tool above to get started.

How are auto insurance premiums determined?

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In order to understand why premiums could change due to retirement, it is important to look at how insurance companies rate customers and their vehicles, by assessing risk based on individual information and general information about whole sectors of drivers.

Rates change based on an assessment of the risk that you or any other client poses. Keep in mind, your own perceptions of risk and those generated by insurers’ statistical models may differ greatly.

Insurers base their risk calculations on whether, statistically, you are more or less likely to file an insurance claim.

Factors like the following can impact your premiums:

  • Your workday commute
  • Your age
  • Your personal driving record

Only some characteristics considered by insurers relate to your history with claims and collisions. Other factors are generated by statistics that relate to the entire population.

However, every insurer uses their own proprietary risk calculation and formula. You can compare the offers available from different car insurance companies to find the one best suited to your lifestyle and choices.

Some key factors used by insurers to determine premiums include:

  • Age at the beginning of the policy
  • Years of driving experience
  • Sex
  • Driving record and insurance history
  • Annual mileage estimates
  • Credit scores
  • Where and how your vehicle is parked
  • The type of car that you drive
  • Usage patterns for your vehicle
  • The type of auto insurance purchased

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Time Behind the Wheel: Retirement and Vehicle Usage

Whenever your employment status changes, it is generally advised to call your insurance agents to notify them of your new status. By updating your information, you will ensure that you are protected in case you need to file a claim.

When you’re reporting a change to retirement, you could qualify for discounts as well. In general, insurance companies assign one of three classes to any vehicle that they insure. These three usage classes are:

  • Pleasure  For those who do not drive to work or school and drive for leisure only. Lowest-priced class.
  • Commute For those who daily commute back and forth to one location, usually for work or school. Middle-priced class.
  • Business  For those who drive for work and must travel to multiple locations. Highest-priced class.

For people who have commuter or business class insurance, retirement could lead to savings on your annual premium as your usage class could change to that of a pleasure driver.

You can compare the rates offered by various insurers for pleasure drivers to see how much you can save by changing the class of insurance that you have.

Retirement Age and Your Auto Insurance

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The “normal” retirement age to receive full Social Security benefits is 65 for people born before 1943; the full retirement age rises for people born in later years.

While this number figures considerably in many or most decisions to retire, many people plan to take early retirement, especially following high-paying jobs with significant savings and investments.

Car insurance rates are tied directly to age. Age at retirement can have a variety of impacts on car insurance costs, as both young drivers and elderly drivers are considered high-risk clients by auto insurers.

Again, this determination is automatic and not linked to your personal driving record.

If you wait until your full Social Security retirement age, you may not see a major change in your premiums. While drivers in their late 50s and early 60s are considered a good risk by most car insurers, rates rise again as senior drivers reach age 69 and up.

There are discounts available for drivers 55 and over from many insurers.

Some senior drivers can still receive discounts by qualifying for programs like the following:

  • Mature Driver Training
  • Daytime Driving
  • Other options made available to senior citizens

You can compare the rates offered by different insurers as a senior driver to ensure you receive the best options available for you.

Another, more unexpected impact related to age could be your credit score. People of retirement age tend to have substantially better credit scores, which could reduce your insurance premium.

Will retirement change your annual mileage?

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Another factor to consider when arranging car insurance for retirement is your annual estimate of mileage driven. Your pre-retirement figure may be significantly higher than your post-retirement figure, especially if you had a lengthy daily commute.

When you’re only driving to run errands or at leisure, your mileage could be expected to decrease significantly. You may even be eligible for a low-mileage discount with some insurers, especially if you now drive less than 5,000 miles annually.

Retirement can be a time for changes. It can be important to examine all expenses to determine where you can save.

Online tools can help you to compare the rates offered by different car insurance providers and maximize your savings. Use our tool today by entering your zip code below.

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