You’d be looking into car insurance for young drivers if you’re aged under 25 and have either just scored your driving licence or are facing car insurance renewal. So too if your teenager finally has a licence (congratulations is in order, isn’t it? ????)
You’ll have noticed that it costs more than car insurance for older, more experienced drivers. Often hundreds of dollars more. See, getting older does come with some big benefits! Even if the kids roll their eyes when you confess you don’t understand how TikTok works. Us neither…
So why is it that car insurance for young drivers is more expensive? We’re here to exlplain.
Why is car insurance for young drivers more expensive?
Before we can look at why car insurance for young drivers is more costly than for older drivers, we need to examine how car insurance premiums are calculated.
Promise it’ll all make sense afterwards.
How premiums are calculated
Your car insurance premiums are determined by your individual risk profile. This means that insurers will decide how risky you – and your car – are to insure, then base your premium on this.
How do they decide what level of risk you pose? Through a process called underwriting. Each insurer has a unique underwriting process and this includes their own risk calculation algorithm.
This is why, when you take out a car insurance policy, you have to answer questions about your age, location, driving history, garaging situation, car make and model, and more. And each insurance provider, like PD Insurance, must follow their underwriter’s insurance rules when providing policies and resolving claims.
The underwriting process is used to determine the value of the insurable asset (the car) and how much of a risk both it and you as a driver are. A very valuable sports car with a high-performance engine would be riskier to insure than an early 2000s Toyota hatchback. Just as a person who’s had five accidents over the past three years is riskier to insure than someone who’s recent driving history is squeaky clean.
And with higher risk comes a higher premium.
So that’s the shortened version of how your car insurance premium is calculated. How does this affect car insurance for young drivers?
The nitty gritty of why young people’s car insurance costs more
When it comes to the price of car insurance for young drivers, it boils down to one thing: they’re a bigger risk.
We all know some very responsible teenagers and young adults. Maybe you are (or were) one of them yourself, and haven’t had a bumper bash or a judgement of error on the road. Not all young people are bad or irresponsible drivers. In fact, most aren’t.
But statistically, they do pose a higher risk. It’s thought a variety of factors contribute to these statistics.
This includes the fact that young drivers are inexperienced, tend to take more risks behind the wheel, may drive at higher-risk times, are more prone to drunk driving, and tend to have a higher incidence of distracted driving.
Research shows that:
- Drivers aged under 25 are the most likely age group to have a fatal crash
- Young drivers are over-represented in road accidents. They make up a small percentage of drivers overall, but are involved in a large percentage of accidents
- A 17-year-old driver with a P1 licence is four times more likely to be involved in a fatal crash than a driver aged over 26 years
What can you do to get affordable car insurance for young drivers?
Unfortunately, there’s no getting around the fact that a young driver will automatically pose a higher risk. All insurers will have higher premiums for a young driver than an older driver with an otherwise-similar risk profile.
That said, there are some things you can do to help keep the premiums as low as possible. Such as:
- Choose a car with a high safety rating
- Choose a lower value car
- Park your car in secure garaging
- Stay claims-free
- Opt for a higher excess. (Read our article on high excess vs low excess for the pros and cons of this)
- Take advantage of insurance provider discounts, e.g. for those who pay their annual premium upfront, haven’t had any claims for the past five years, are the only driver of their car, etc.
These are good starting points to keep your premium as low as possible, while still offering solid protection to younger drivers.
Read our article for more advice on how to lower your car insurance premiums if you think the whole family could do with saving some bucks.
And if you need to buy a set of wheels for the new driver, read our tips on saving for a new car and for finding the best car for teenagers.
Insurance is still crucial
Ultimately, know that car insurance for young drivers is going to be more costly than for more road-experienced folk. There’s no getting around it.
But young people’s higher risk profile is one of the main reasons that comprehensive car insurance is so important – wouldn’t you want to be well covered if you knew you were higher risk?
Check out our car insurance plans here for more information.