Why are insurance costs so high for new drivers? (And what can be done to reduce them?) - NPG online (2023)

The thrill of passing your driving test and thesubsequent freedom of owning your own car are two feelings that are hard tobeat. The only thing to ruin the excitement is the dreaded insurance costs. Whetherwe think insurance companies are justifiedin their pricing or not, the average first-year premium fora new driver aged between 17 and 25 is 1,400, and that doesn’t decrease muchfor older first-time drivers. But why is that? And how on earth can we getthose costs down to something that’s a little bit more affordable? Well, hereare a selection of insurance saving tips for new drivers, as well as somegeneral advice on how not to get stung when looking to get insured.

Why is it so expensive to get carinsurance?

Insurance companies base their premiums off of threethings: statistics, the risk you present to other road users and the experience– or lack of it – that you have. As a new driver, especially if you’re youngerthan 25, the statistics are not in your favour. You don’t have a no claimsbonus building up to show you’re a safe driver, and, in 2018, 17% of allcasualties in road accidents were drivers aged between 17 and 24, so insurancecompanies see your risk level to be much higher.

Does it affect me even if I’m over 25?

Unfortunately, yes. There’s no getting aroundexpensive first-year premiums. While your age doesn’t play as much of a factor,your lack of experience and confidence on the roads certainly work against you.That lack of no-claims bonus is the biggest contributor towards bumping upinsurance premiums.

Is there anything I can do to reduce myrisk/insurance costs?

There are a wide range of options, tips and tricks tohelp reduce your first-year’s premium. Here are ten of the best ideas to saveup to a few hundred pounds on your car insurance – but never, ever lie aboutanything when taking it out. To do so is to defraud your insurer and, in theevent of a claim, your insurance could be invalidated, and you might end upfacing prosecution.

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Have your car fitted with a black box:

A really good way to prove to insurance companies howsafe you are at driving is to have a black box fitted. This device monitorsyour driving style and when and how often you drive to give you scores and afew tips to improve your scores. Most offer a reward system and significantdiscounts on subsequent policies on top of your first year’s no-claims bonus ifyou don’t have an accident. Most insurance companies now offer a black boxincentive, so consider everything else you get with the policy before makingyour choice. Try and choose a black box where you can track your progress on anapp or where you get regular feedback to improve your driving style. Not all blackbox policies impose a curfew, but if yours does have one, stick to it. Yourinsurance could be invalidated or cancelled if you’re constantly drivingoutside the hours you’re insured for.

Add extra drivers onto your policy:

Having one or more experienced driver named on yourinsurance policy is a great way to reduce costs. If they’ve got a clean drivinglicence and several years no-claims bonus, insurance companies consider therisk reduced because at least some of the driving will be done by a much moreexperienced driver. If you follow this route, make sure that you’re the maindriver and the policy is in your name. If you drive the car most of the timebut the experienced adult is the named driver is called ‘fronting’ we mentionedearlier.

A couple of other options to consider are multi-car insurance and becoming an occasional named driver on another policy. With a multi-car policy, you can have up to six cars registered to the same address, each with their own level of cover and excess. You can have multiple cars join the policy where their insurance renewal dates come around and you’re likely to save a bit of money as well – perfect for a first-time driver.

Why are insurance costs so high for new drivers? (And what can be done to reduce them?) - NPG online (1)

Becoming an occasional named driveron another car is great if you’re unlikely to drive very far or very often,making it a good option for younger drivers as a result. However, there are acouple of downsides to this option. Firstly, adding a new driver will increasethe price of the existing policy. This is down to the increased risk from theinsurer’s perspective. Secondly, it’s less convenient as you’ll only be able touse the car when the named driver isn’t using it, so your level of freedom iscertainly reduced. However, if you can’t afford to run a car yourself, it’scertainly a cost-effective way to build up a little bit of experience.

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Choose the right insurance bracket for you:

Whenever a new car is released, a panel of expertshave to decide on what insurance group it is going to be placed in. They use ascale of 1 to 50, with insurance group 1 being the cheapest and insurance group50 the most expensive. To work out where each car should go, the panel considersvalue, repair costs, the cost of the 23 most common parts, performance(acceleration times and top speed) and security features for the specific makeand model. This process means that the latest Ferrari is going to be in a muchhigher insurance bracket than the latest Hyundai. For new drivers, especiallythose under 25, the gold standard is finding a car to get you into insurancegroup 1 or 2. To find out which insurance bracket your prospective car is in,(or if you’re an older driver curious about what group theirs falls into), checkout this handy comparisontool.

Can you alter your job title to make itsound more appealing to insurers?

A word of warning – do not lie to your insurancecompany. Ever. As we mentioned above, you could get into serious trouble if youdo and then try to make a claim.

Insurance companies think that certain jobs areriskier than others, based off of data from previous claims. You’re likely topay more if you’re unemployed or in a job where there’s typically a lot oftraveling. But did you know you could get around this by carefully consideringwhat you actually do and seeing if there’s a subtlydifferent career option to reflects this?

As you can see, by exploring all your options, you cansave up to a few hundred pounds. Just make sure it’s a job title very similarto what you actually do. For example, if you’ve always put down ‘labourer’,what sort of labour do you do? If you’rea builder, maybe consider choosing the ‘bricklayer’ option instead? Just don’tchoose an option which is a complete lie – we can’t stress this enough.

Shop around to save:

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Never, ever, ever just choose the first deal that you find. It’s a simple tip that will always help you save money, not just with car insurance. As with everything, it has to be a good deal for you. Otherwise, what’s the point in investing so much money? Consider every option before you choose a policy and, where possible, haggle to see if the insurance company is willing to match another quote that you’ve found. You can also take the assistance of a car insurance broker who can provide you with various quotations to compare and choose from. Moreover, insurance companies may also have different plans; a broker can help you choose one that fits your requirements, be it accident cover, personal injury cover, or any other necessity. This becomes especially important when you come to renew your insurance in the second year as you’ll never get the best possible deal by auto-renewing.

What cover is best for you?

The type of insurance you take out will affect thelevel of cover you receive but also the price you’ll pay. Comprehensive coverprotects both your vehicle and any other vehicle involved in an accident,whereas third-party only covers other vehicles. Consider what you can afford topay in the event of a claim but also how often you’re going to drive and howmuch you care about the appearance of your car. If you’re not going to bebothered by a few dents and scuffs, third-party is a good idea for you, but itcould end up being more expensive. This is because it’s such a popular optionwith younger drivers, and so many more claims are made against third-partyinsurance. As with anything, comparison is key. Don’t rush your decision.

Don’t modify your car:

Insurance companies hate this. Adding any sort ofmodification to your car automatically increases the cost to insure it because theythink it increases the risk of you having an accident and thus making a claim. Ifyour heart is set on modifying your car, don’t think you can get away withouttelling your insurance company. If you try and claim on a car that isn’t theexact one covered by your policy, you’re unlikely to have it accepted. Thisapplies to modifying your car a few months into your policy as well, so keepyour insurance company aware of any changes you might make.

Change your payment method:

Why are insurance costs so high for new drivers? (And what can be done to reduce them?) - NPG online (2)
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It’s cheaper to pay upfront than topay monthly on a direct debit scheme. How? Well, you’ll be charged interest onmonthly payments by your insurance company but not if you pay the entire lumpsum up front. You can often save yourself a couple of hundred pounds this way –the only downside being that a new or younger driver will have to find around 1,000 to spend in one go. Go with whichever way works out as most affordablefor you, but make sure you have the complete breakdown of the monthly costfirst.

If you can increase your excess, do so –but be sensible:

An excesspayment is the cost that you will pay should you make a claimagainst your insurance policy. There are two types: compulsory excess andvoluntary excess. Compulsory excess is set by your insurance company and is thefixed fee that you have to pay should you make a claim. For a young or newdriver, this could be the first 400 of the total cost of any claim. You canthen choose to pay extra on top of any claim in return for a reduced premium.Insurance companies like this because they don’t end up paying out as muchmoney towards a claim.

However, you will need to be able to afford to payboth up front in the event of any claim – so be careful about raising yourvoluntary excess too high. If you set your voluntary excess as 300, forexample, make sure you can afford a 700 one-off payment at any point. If youdon’t have much disposable income, it might not be worth setting a voluntaryexcess at all. Consider the long-term implications before you look forshort-term financial gain.

Increase security:

Your car will have been assigned a security rating ofE, A, P, D or U, when it was assigned its insurance group. E and A mean it hasthe best possible security and U means the security level is consideredunacceptable. Insurance companies like cars with more safety features so ifthere’s anything you can do to increase the security of your car, such asfitting an immobiliser or an alarm, consider doing so. It might cost a bit ofmoney to install, but it could lead to a significant discount on your premiumas well.

Obviously, it won’t be practical or affordable for youto follow all of these tips or avoid paying a significant amount for yourfirst-year’s insurance – that’s just the unfortunate nature of the game. Theeasiest way to save money is to drive safely and build up your no-claims bonusbecause, when it comes to saving on your car insurance, experience counts. Thatdoesn’t mean you can’t get a good deal in your first year though – you’ve justgot to know where to look and what to do.

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Why is insurance for new drivers so expensive? ›

Why do younger and older drivers pay more for car insurance? Young drivers pay more because statistics show that teenagers are inexperienced, making them more likely to get into car accidents compared to other age groups.

How do you reduce the cost of auto insurance and what are some factors that influence the cost of your auto insurance? ›

How to Save on Car Insurance Costs
  • Take Advantage of Multi-Car Discounts. ...
  • Pay Attention on the Road. ...
  • Take a Defensive Driving Course. ...
  • Shop Around for Better Car Insurance Rates. ...
  • Use Mass Transit. ...
  • Downsize Your Vehicle. ...
  • Increase Your Deductibles. ...
  • Improve Your Credit Rating.

Who has the cheapest insurance for new drivers? ›

Our research indicates Nationwide, USAA and GEICO provide the cheapest insurance rates for new and young drivers.

Is car insurance cheaper for older first time drivers? ›

New drivers who are older tend to pay slightly less insurance, as part of the car insurance premium you pay will be based on your age. But your experience as a driver also determines how much you pay so an older driver with less driving experience will pay more than an older driver with more experience.

What is one of the methods of reducing insurance cost of an insured? ›

Increasing deductibles or voluntary deductibles can lower your car insurance premium. A deductible is the out-of-pocket amount paid by the policyholder when making a claim.

How can we reduce high costs? ›

7 tips for reducing expenses in your business
  1. Make a plan. You need to evaluate where your business is now and where you want to take it in the future. ...
  2. Track expenses diligently. ...
  3. Benchmark against your industry. ...
  4. Manage variable costs. ...
  5. Get tough on fixed costs. ...
  6. Invest in technology. ...
  7. Offer incentives to staff.

What are the top 3 things you can do to lower your health insurance costs? ›

How can I lower my monthly health insurance cost?
  • You can't control when you get sick or injured. ...
  • See if you're eligible for the tax credit subsidy. ...
  • Choose an HMO. ...
  • Choose a plan with a high deductible. ...
  • Choose a plan that pairs with a health savings account. ...
  • Related Items.

What is the simplest way to lower your auto insurance premium? ›

Set higher deductibles on your auto insurance.

The higher your deductible — the amount of money you will pay out of pocket in the event of a claim — the lower your premium generally is. Typically, deductibles range from $0 to $1,500.

Who normally has the cheapest car insurance? ›

The cheapest car insurance company overall: State Farm

State Farm is the cheapest major auto insurance company in the nation for good drivers, according to NerdWallet's 2023 analysis of minimum coverage rates.

At what point do you drop full coverage on my car? ›

The 10% rule says you can consider dropping full coverage insurance when the annual premium meets or exceeds 10% of your car's market value. For example, if your car is worth $4,000, paying $400 or more for full coverage might not be worth it to you.

What factors can lower or increase insurance rates? ›

Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age, anti-theft features in your car and your driving record.

What is one of the major causes for higher insurance rates? ›

Accidents are increasing, leading to more claims

The number of car accidents has gone up, leading to more insurance claims. This higher claims volume, coupled with higher vehicle repair and replacement costs, is ultimately what's driving insurance rates up throughout the industry.

What is the best type of insurance for a new driver? ›

Telematics insurance is a good option for new (and young drivers), as - if you drive carefully - you can save money on your car insurance. Your insurance provider will monitor your driving habits, through either a small black box installed under your dashboard, a plug-in device or an app on your smartphone.

Will my insurance be cheaper with a newer car? ›

Unfortunately, there's no clear answer to this. The cost of your premium will depend partly on your car - generally the newer the car, the better its safety and security. But equally it may cost an insurance provider more to replace a new car than an old one, so this will be a factor too.

Is it cheaper to insure one driver or two? ›

Your monthly premium will reflect the added risk of multiple drivers using one vehicle — so you'll most likely pay more than you would for a single-driver policy. However, a multiple-driver policy is usually cheaper than purchasing two individual auto insurance policies.

Are black boxes worth it? ›

In many cases, black boxes can be used to improve your driving, and safe driving gives you real rewards. Things like heavy braking and driving above the speed limit are monitored and discouraged, reducing your score and increasing your costs.

Are 10 year olds cars cheaper to insure? ›

Are older cars cheaper to insure? Yes, most older cars are cheaper to insure, especially in terms of comprehensive and collision insurance. Cars lose value as they age, so the potential insurance payouts after an accident drop as well.

What does a black box do? ›

What is a black box? A black box is another name for a telematics unit that's fitted to a car to record how a car is driven. This data determines how safe a driver you are and is then sent to your insurer, which uses it to decide on your premiums.

Does credit score affect car insurance? ›

A higher credit score decreases your car insurance rate, often significantly, with almost every insurance company and in most states. Getting a quote, however, does not affect your credit.

What is reducing in insurance? ›

Reduction in coverage means a change made by the insurer which results in a removal of coverage, diminution in scope or less coverage, or the addition of an exclusion. Reduction in coverage does not include any change, reduction, or elimination of coverage made at the request of the insured.

What can you do to decrease the cost of insurance policies quizlet? ›

What can your do to decrease the cost of insurance policies? raise the deductible, shop around for rates, and take advantage of applicable discounts.

What are the examples of cost reduction? ›

Cost-Cutting Ideas
  • Save electricity. ...
  • Reduce waste. ...
  • Reduce office supplies and utilities (physically and digitally) ...
  • Reduce service costs to align with usage. ...
  • Save travelling costs. ...
  • Allow remote work to save on office rent. ...
  • Look up in the cloud. ...
  • Consolidate incidentals.

How can we improve the cost? ›

How to improve cost control
  1. Prepare your budget. ...
  2. Manage inventory. ...
  3. Measure expenses in real time. ...
  4. Remain proactive with repairs. ...
  5. Define key performance indicators. ...
  6. Anticipate changes. ...
  7. Collect data. ...
  8. Maintain detailed records.
Sep 29, 2021

What is the most effective way to reduce total quality cost in a company? ›

How can we reduce the cost of quality? You can reduce the cost of quality through prevention efforts, improving worker training, and using quality management software that streamlines your quality workflow.

Can you negotiate your health insurance premiums? ›

“In general, you cannot use a competitor's rates to negotiate lower premiums with another carrier,” said Donahue. “However, many insurance companies will aim to cut premium costs for nearly anything that could lower your risk profile.”

Can you negotiate health insurance cost? ›

Ask to lower the bill

“Consumers may not realize that you can contact the health-care provider or the hospital and ask to negotiate,” Bosco said. Reach out, be nice, and tell the provider that you can't afford to pay the bill. Then, ask for a reduction.

Why do insurance companies charge more if they believe you are a high risk customer? ›

Insurance companies consider some people to be "high risk" drivers. As the name suggests, these drivers can present a greater liability to insurers due to their driving record, the type of cars they drive, or even their credit history. The insurance company could see them as more expensive to insure.

How might you reduce premium rates for vehicle insurance quizlet? ›

Three ways to reduce your car insurance premiums are get a high deductible, comprehensive insurance, and have a good driving record.

What are ways to reduce your premium for life insurance? ›

When shopping for a new life insurance policy, there are several ways to save money on insurance premiums:
  • Buy life insurance as soon as you need it. ...
  • Shop the market. ...
  • Choose term life insurance. ...
  • Lower the face value and/or the term length of the policy. ...
  • Opt to pay your premiums annually.
Oct 1, 2022

What factors will an insurance company use to determine the cost of your health insurance? ›

Five factors can affect a plan's monthly premium: location, age, tobacco use, plan category, and whether the plan covers dependents. Notice: FYI Your health, medical history, or gender can't affect your premium.

Who is cheaper Geico or Progressive? ›

Is Progressive Cheaper Than Geico? Both Geico and Progressive offer cheap car insurance to drivers across the country. Geico's rates are typically lower overall, but Progressive tends to offer better prices to those with a recent DUI, at-fault accident or speeding ticket on their driving record.

Is Geico cheaper than Liberty Mutual? ›

Geico has cheaper car insurance prices than Liberty Mutual across multiple coverage levels. A minimum-coverage policy from Geico costs $667 per year, or $56 per month, on average.

Is USAA only for military? ›

Who can join? Our products and services are open to current and former military and their spouses. Children of USAA members can join, too.

What is a good collision deductible? ›

Comprehensive claims tend to be filed for less damage than collisions, so having a lower deductible is often logical. Collision deductibles can sometimes go as low as $100 or $250, but most agents recommend that you start at $500 and increase if you can afford to.

What happens if car insurance offer is too low? ›

Negotiating with the car insurance company. If the adjuster's initial offer is far below the estimates you gathered, you should negotiate with the insurance company. You don't have to file a lawsuit to start. These discussions can take place in person or via email, but you'll want to get the final decision in writing.

Should I have collision insurance on a 10 year old car? ›

Since older cars, typically 10 years and older, aren't worth as much as those newer vehicles on the road due to depreciation, dropping comprehensive and collision coverage is a good idea if your vehicle's value drops to a level you feel comfortable paying out of pocket if it were totaled.

What are four ways to lower your insurance rates? ›

Here are some ways to save on car insurance1
  • Increase your deductible.
  • Check for discounts you qualify for.
  • Compare auto insurance quotes.
  • Maintain a good driving record.
  • Participate in a safe driving program.
  • Take a defensive driving course.
  • Explore payment options.
  • Improve your credit score.

What are the 5 factors that impact the price of your auto insurance? ›

5 Factors That May Impact Your Car Insurance Rate
  • Factor #1: Make & Model of Your Car. The type of car you drive can have an impact on how much you're required to pay for coverage. ...
  • Factor #2: Zip Code. ...
  • Factor #3: Your Car's Age. ...
  • Factor #4: Your Driving Record. ...
  • Factor #5: Marital Status & New Drivers.

Why is insurance so expensive for new drivers? ›

Young drivers are more expensive to insure because they're statistically more likely to have an accident — around 25% of all claims are made by drivers under the age of 25. Insurers also look at lots of other things when working out how much you should pay for a policy, including your: Vehicle. Job title.

What is a factor that increases costs of insurance premiums? ›

Credit history. Your credit history is an important factor insurers use when calculating premiums in most states, considering that drivers with a poor credit score pay an average of 71% more than drivers with good credit.

Why is car insurance so expensive for 20 year olds? ›

Car Insurance for 20-Year-Olds

Younger drivers are less experienced, putting them in a higher class of risk for insurers. As a result, their car insurance rates are higher.

Why is insurance cheaper with named drivers? ›

Adding a named driver often makes the premiums cheaper. This is because, since the car is shared, it's assumed you'll spend less time driving. This reduces the probability of you having an accident and making a claim, which is reflected in cheaper car insurance quotes.

Why is Michigan auto insurance so high? ›

Because Michigan is a no-fault state, drivers must have personal injury protection (PIP) coverage, which covers financial losses regardless of who is at fault in an accident. This additional required coverage is one of the main reasons insurance premiums in the state are so high.

Do new drivers need their own insurance? ›

Whether you're a new driver or have been on the road for years, if you own and drive a car, you are required by law to have at least third-party car insurance. If you are discovered using a vehicle without insurance, you could be fined, face court prosecution, or your car could be taken away or destroyed.

Why is first year car insurance so expensive? ›

Young drivers are more expensive to insure because they're statistically more likely to have an accident — around 25% of all claims are made by drivers under the age of 25. Insurers also look at lots of other things when working out how much you should pay for a policy, including your: Vehicle. Job title.

Why do younger people pay more for car insurance? ›

Research shows that due to a lack of experience behind the wheel, young drivers get into more accidents than the average adult, which puts young drivers into a higher risk category. This is the primary reason why young drivers pay a much higher premium for their insurance.

At what age is car insurance cheapest? ›

Experienced drivers are less likely to have accident claims, which means they cost less to insure. At Progressive, the average premium per driver tends to decrease significantly from 19-34 and then stabilize or decrease slightly from 34-75.

Can you have 2 main drivers on car insurance? ›

If you want other people to be able to drive your car, you can also add multiple named drivers to your car insurance, although you may have to pay more to do so. If you only need to insure another driver on your car for a short while, you can take out a temporary car insurance policy.

Does it matter who is the main driver on car insurance? ›

The main driver (or vehicle policyholder) is the person who drives the vehicle most often and earns no claims discount. They do not need to be the principle policyholder but they must live at the same address as them.

Can I drive someone else's car on my insurance? ›

As we've seen, driving other cars (DOC) insurance isn't usually included as part of a fully comprehensive policy. Unless your policy states otherwise, you'll only be able to drive your partner's car if they've added you as a named driver or have a family or any driver car insurance policy.

How much is the average car insurance per month in Michigan? ›

What is the average cost of car insurance in Michigan? The average cost of full coverage car insurance in Michigan is $4,333 per year or $361 per month. For a state minimum coverage, the cost is around $2,921 per year or $243 per month.

What US city has the highest auto insurance rates? ›

The NYC metro area ranks as the most expensive area for car insurance. Brooklyn tops the list — on average, full coverage costs almost $3,000 per six-month policy! Detroit, Michigan is the second priciest major city for auto insurance, with an average cost of over $2,300.

What type of insurance should a new driver get? ›

Comprehensive car insurance

This type of cover offers the most amount of protection for you, your passengers, your vehicle and others on the road. Policy packages do vary by insurer, so make sure you read all documents before signing up.

What is the best way to insure a car for a learner driver? ›

Learner driver insurance can last anywhere from a few hours to a whole year. If you plan to keep using the same car once you've got your licence, annual cover might be best. If you're using a car solely for lessons, consider short-term cover – just make sure it'll keep you covered until you pass your test.

Can I drive my son's car on my insurance? ›

You can only drive someone else's car on your insurance policy if it includes driving other cars insurance. This will only be third-party cover, even if your own policy is fully comprehensive.


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