How New Drivers Can Get the Best Cheap Car Insurance
Young drivers, immigrants and others without driving experience will pay more for car insurance than those with more time behind the wheel
You can employ some simple strategies to save money on car insurance even as a new driver
Compare quotes from at least three companies, as rates vary widely
Congratulations on getting your driver’s license. Whether you’re a teen driver with a newly minted sign of independence, an older driver who’s just gotten around to taking the test or an immigrant who has just recently arrived in America, you face some common issues when it comes to finding cheap car insurance. Since insurance companies look first at your driving record when setting rates, car insurance for new drivers is usually more expensive than for other demographic groups.
However, insurance companies consider many different factors besides your driving record, so it’s important to shop around and compare quotes from at least three companies to find the best insurance for new drivers.
How Much Is Car Insurance for New Drivers?
There are different types of new drivers. Groups an insurance company will consider to be new drivers include:
- Older drivers who have just gotten a driver’s license
- People with a gap in insurance coverage
A 16-year-old with a new driver’s license and no driving experience will pay the highest rates — teens pay nearly 100% more than the average driver. However, if you have a gap in insurance coverage, insurance companies will consider you a high-risk driver. That’s why it’s important to keep your car insurance active if you can.
Anyone with limited driving experience will likely pay more for coverage. The average annual cost car insurance for a 16-year-old driver ranges from a low of $3,612 with State Farm to a high of $7,455 with Progressive. As you can see, shopping around can save you $3,843.
Cheapest Car Insurance For New Drivers Under 25 Years Old
Teen drivers are the most expensive drivers to insure. They have very little experience on the road and statistically, they’re more likely to get into accidents. Teens are three times more likely to be in a fatal crash than drivers over the age of 20. Part of this is because teenagers take more risks than any other age group, and part of it stems from inexperience and immaturity.
The most affordable way to save money if you have a teen driver is to keep them on the family policy. Allstate had the lowest average quote for adding a 16-year-old driver to a family policy at $3,146. However, it’s typically much cheaper to add a teen to your family policy as opposed to getting them an individual policy. Based on the national average rates, it’s approximately $1,947 dollars cheaper to add a teen to a family policy as opposed to getting them their own policy.
New Driver on a Family Policy vs. Individual
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- CompanyAdding 16-Year-Old to Family Policy
- State Farm$3,406
Cheapest Car Insurance With No Driving Experience or a Gap In Coverage
If you are older than 20 but have just gotten your driver’s license, you’ll probably pay higher premiums than drivers with more experience, but less than a 16-year-old new driver. Insurance companies see age as less of a factor after age 20 and even less after age 25. Even with no driving experience, you’re still less of a risk than a teenager.
Another group that typically pays more for car insurance is drivers with a gap in insurance coverage. Insurance companies consider such drivers to be a higher risk because they assume that you were driving without insurance during that time. Other reasons car insurance companies think you’ve had a gap in coverage may include:
- Missed payments
- Lack of renewal
- Policy canceled due to accidents and/or tickets
- Financial hardship
It’s important to have continuous coverage to get the best rate. Even if you’re not going to be driving for a period of time, like an extended vacation or a long illness, it’s best to keep your car insurance active. If you are absent-minded, set up automatic payments to keep your coverage current.
Average Annual Car Insurance Costs for a New Driver
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- 4.Liberty Mutual$4,654
- 7.State Farm$4,602
Cheapest Car Insurance For Immigrants
Even if you have maintained a squeaky-clean driving record for years in another country, insurance companies in the United States will still consider you a new driver. It makes sense: other countries may have different laws, different driving cultures, etc. Also, insurance companies only access domestic driving records, so you have a blank history when you start driving here. Your rates will be similar to those of any new driver.
If you are an undocumented immigrant, 11 states (plus the District of Columbia) will allow you to get a driver’s license:
If you live in one of these states, you should have no trouble finding car insurance once you have your license. If you’re not a resident of one of these states (or even if you are), you should apply for a Permanent Resident Card (green card). The United States Citizenship and Immigration Services (USCIS) has information on this process.
If you’re merely a visitor here, the easiest way to obtain car insurance is through your car rental company, which will likely be cheaper as well.
When you go to take the driver’s test, you’ll need to bring identification with you, such as:
- Foreign driver’s license
- Birth certificate
- Permanent resident card
- Proof of residence (like a utility bill with your address on it)
How to Find Cheaper Insurance as a New Driver
Here are some strategies you can employ to find cheap car insurance as a new driver.
Stay on the family policy
If you’re under 25, it’s cheaper to stay on your family policy, rather than to get an individual policy for car insurance. You might have to change insurance companies to get the best deal, but the savings can be significant.
The Insurance Information Institute recommends getting quotes from at least three companies before you settle on one. Even if you’re adding a teen to your policy, it pays to get quotes from other companies. Insurance companies know most people don’t often think about their car insurance and your company may not be offering you the best rate. Get a quote from your current insurer, plus at least two other companies.
Take advantage of discounts
Many insurance companies offer discounts, including:
- Good student discount: These discounts are available at many different insurance companies, although they may vary in how they define a good student. Expect to provide proof of at least a B average.
- Bundled discounts: If you buy your homeowners insurance and your car insurance from the same company, you can often earn a 10-15% discount.
- Defensive driver discounts: Check with your insurance company before you choose a course, as some maintain a preapproved list of defensive driver courses. You can usually get an 8-10% discount for taking these classes, but even if you don’t get a discount, these courses can give you the skills you need to help prevent accidents. This makes them a good investment even if you don’t get a discount.
- Paid-in-full: If you pay your premium all at once, this often gets you a 5-10% discount.
- Low-mileage: If you don’t drive very much, you may be entitled to a low-mileage discount. The qualifying mileage varies from company to company. Some companies consider driving less than 7,500 a year low-mileage, and others will consider less than 15,000 miles eligible to earn a low-mileage discount.
- Green/hybrid car discount: Driving a hybrid or electric vehicle can earn you a 10% discount.
Drive a less expensive car
Some cars are more expensive to insure than others. Luxury cars are expensive to own and expensive to repair and will require full coverage car insurance which will cost you more to insure. High-performance sports cars can raise your rates by hundreds of dollars per year, regardless of how old you are or where you live. A more practical car, such as a Toyota Camry, could be insured with liability car insurance will cost you less in insurance premiums.
Improve your credit score
Insurance companies use your credit score to determine rates because, according to Edmunds, people with higher credit scores get into fewer accidents and cost insurance companies less money. However, three states prohibit insurers from using credit scores to set premiums: Massachusetts, California and Hawaii. Consumers in every other state should pay bills on time and not abuse credit cards, which will increase their credit scores and lower their insurance rates.
Choose lower coverage amounts
Every state (except New Hampshire) requires a certain minimum amount of liability insurance. It will look something like this: 25/50/20.
- 25 ($25,000): The maximum your insurance company will pay for injuries per person in an at-fault accident.
- 50 ($50,000): Maximum amount the insurer will pay for injuries per vehicle.
- 20 ($20,000): Maximum limit on property damage.
You’ll need at least your state’s minimum requirements, but you might want more.
Liability coverage doesn’t cover your car or your medical bills. In addition, if you cause an accident and hit a car containing four people, medical bills can quickly exceed the minimum amount of liability insurance required by your state. Those four people could sue you and you would have to pay for their medical bills out-of-pocket if you don’t have enough coverage, which can easily bankrupt many people. So, yes, you can pay for only the minimum amount of liability insurance, but it’s a risk.
The data collected was based on a 16-year-old driver with no accidents or tickets, driving a Toyota Camry. MoneyGeek crunched numbers and compared rates across eight of the largest national auto insurance companies.
Read More on Auto Insurance
About the Author
- Car and Driver. "What Happens if Car Insurance Lapses?." Accessed August 24, 2020.
- Edmunds. "Does Your Credit Score Affect Your Car Insurance Rate?." Accessed August 25, 2020.
- Insurance Information Institute. "Choosing an Insurance Company." Accessed August 24, 2020.
- Insurance Information Institute. "Automobile Financial Responsibility Laws by State." Accessed August 25, 2020.
- Magliano, J. PhD. and Nina S. Mounts, PhD. Psychology Today. "Why Are Teen Brains Designed for Risk Taking?." Accessed August 24, 2020.
- U.S. Citizenship and Immigration Services. "Welcome to the United States: A Guide for New Immigrants." Accessed August 24, 2020.