When Does Car Insurance Go Down in Price?

Age is just one factor used to determine your rate

Family traveling by car

Kong Ding Chek / Getty Images

When you purchase auto insurance, you enter into a contract between you and the insurance company. You agree to pay the insurance premium when it’s due, and the insurer agrees to pay for specified expenses when you suffer a covered loss. For instance, if you have collision coverage, your policy might cover body repairs minus your deductible following a crash.

Young drivers usually pay more for car insurance than more-experienced drivers. Often, rates decrease by the time they reach age 25. But age is not the only factor auto insurance providers use when setting drivers’ insurance rates. Even before reaching 25, young drivers can employ other methods to reduce their rates, such as taking a driver training course and maintaining good academic grades. Knowing what’s available to you can help you lessen your auto insurance bill.

Key Takeaways

  • Insurance companies typically place young drivers in the nonstandard risk category.
  • While many young drivers receive a rate decrease when they turn 25, factors such as traffic tickets and credit problems can also impact their premiums.
  • Typically, young drivers who don’t own a car and still live at home can get the best auto insurance rate by remaining on a parent’s policy.
  • Young drivers can sometimes get a better car insurance rate by shopping around and earning discounts.

The Age When Car Insurance Prices Go Down

Underwriting and car insurance pricing procedures vary by insurer. Providers determine a driver’s rate by how likely they are to file a claim based on a number of factors. Drivers who pose a high risk of filing a claim pay higher premiums, while drivers who pose a low risk enjoy lower rates.

Risk Categories

Typically, carriers place policyholders in one of three risk categories:

  • Preferred: Insurers offer preferred rates to drivers who are least likely to file a claim. Typically, drivers in this category have not filed a claim or received a traffic citation in the past three to five years, earning them the lowest available rates.
  • Standard: Standard rates are higher than preferred rates and are offered to drivers who pose moderate risk of filing a claim. Usually, providers offer standard rates to people who drive family-style automobiles and have relatively good driving records.
  • Nonstandard: Carriers charge higher, nonstandard rates to drivers they consider high risk. Generally, insurers charge nonstandard rates to drivers under age 25 because they do not have as much driving experience as older drivers. Drivers who have accident citations, driving-under-the-influence convictions, and speeding tickets on their driving records might also have to pay nonstandard rates.

Drivers Under 25

Generally, male drivers under age 25 pay the highest rates, however, drivers who maintain good driving records can experience premium decreases between ages 17 and 29. Insurers often eliminate youthful driver surcharges when a policyholder turns 25.

Age is not the only factor insurance companies use when determining your auto insurance rate. For example, if you maintain a good driving record up to age 25 but have poor credit, you may continue to pay high insurance premiums.


Young drivers who still live with their parents and do not own their own vehicles can remain on a parent’s car insurance policy and typically pay lower premiums than if they buy their own coverage.

How Insurance Companies Determine Rates

Insurers determine a driver’s risk category during the underwriting process. The process uses algorithms, which analyze your claims history and personal information to determine a rate within your assigned category. Factors used in determining your premium can include your:

  • Age
  • Annual mileage
  • Claims history
  • Coverages and deductibles
  • Credit history and rating
  • Driving experience
  • Driving record
  • Gender
  • Location
  • Marital status
  • Vehicle type

Sometimes, providers offer more favorable rates to drivers who enroll in usage-based insurance programs. These programs base rates on your driving habits, such as the time of day you drive, the number of miles you drive, and how well you avoid hard stops.


Auto insurance laws vary by state. Most states require drivers to carry liability coverage, and some also require medical payments, uninsured, and underinsured motorist coverages.

How To Get a Lower Price on Car Insurance

If you’re paying high car insurance rates, you can take several steps to reduce costs.

  • Shop around: Rates can vary widely by insurer. Get rates from several insurance companies, comparing coverages and premiums. If you’re shopping for a new car, always get rates before you buy, because some vehicles cost more to insure than others.
  • Drop unnecessary coverage: If you’ve paid off your car loan, consider dropping collision and comprehensive coverages. However, when you discontinue these coverages, you’ll have to pay out of pocket if a thief steals your vehicle or you total it in an accident.
  • Increase deductibles: If you carry collision and comprehensive coverages, consider increasing your deductibles. While you’ll pay more out of pocket if you file a claim, you’ll save on premiums.
  • Take advantage of discounts: Discounts can greatly reduce your auto insurance rate. Many insurers offer safety and security discounts for vehicles equipped with airbags, anti-lock brakes, and anti-theft systems. Young drivers may also qualify for driver training discounts and good-student discounts when they maintain good grades.
  • Trade in your automobile: Some cars cost more to insure. For instance, a convertible usually costs more to insure than a more modest sedan.
  • Improve your credit: Many states allow insurance companies to use credit ratings when determining your insurance rate. Improving your credit rating can help reduce your premiums in the future.


Some rate factors are more difficult to offset. For example, if you live in a city with high auto-theft rates, you’ll typically pay more for auto insurance.

Shop Around if Premiums Cost Too Much

Shopping around is one of the best ways to reduce your auto insurance rate. Since many insurers offer online quotes, it’s easy to obtain several rate quotes in one sitting. Getting the lowest rate shouldn’t be your only goal; you also need to find all the coverages you need, provided by a reputable and financially stable carrier. For the best results, follow these guidelines:

  • Make sure an insurer has a license to sell insurance in your state. The National Association of Insurance Commissioners provides a license lookup tool on its website.
  • If an insurer has affiliate companies, ask an agent which company will provide your coverage.
  • When speaking with an agent, ask questions about how your driving history, credit history, and the type of vehicle you own will affect your premiums.
  • Ask agents about discounts.
  • Inquire about dividend and usage-based insurance programs.
  • Find out if the insurance company charges higher premiums or fees for monthly installment plans.

Frequently Asked Questions (FAQs)

How much does car insurance cost on average per month?

According to the National Association of Insurance Commissioners, in 2019, U.S. car owners paid an average of $1,096 per year, or $93.33 per month, for car insurance. This average included policies with liability, collision, and comprehensive coverages. However, many factors determine your auto insurance rate, so national averages are not always dependable.

What is a deductible in car insurance?

Your car insurance policy’s deductible is the amount you must pay from your own funds when filing a claim. Let’s say your policy has a $500 collision deductible. If you have an accident that causes $2,000 in damages, the insurance company will pay up to $1,500 in repair costs and you will be responsible for the remaining $500.

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  1. Wisconsin Office of the Commissioner of Insurance. “Consumer’s Guide to Auto Insurance,” Page 6.

  2. Wisconsin Office of the Commissioner of Insurance. “Consumer’s Guide to Auto Insurance,” Page 8.

  3. National Association of Insurance Commissioners. “Insurance Considerations for Young Singles and Single Parents.”

  4. National Association of Insurance Commissioners. “Auto Insurance.”

  5. Connecticut General Assembly. “Auto Liability Insurance Requirements in Other States.”

  6. State of Connecticut Insurance Department. “Auto Insurance: What Affects Premiums?

  7. Wisconsin Office of the Commissioner of Insurance. “Consumer’s Guide to Auto Insurance,” Page 5.

  8. National Association of Insurance Commissioners. “​​2018/2019 Auto Insurance Database Report,” Page 13.

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