Does My Auto Insurance Premium Go Down When I Turn 25?

Does My Auto Insurance Premium Go Down When I Turn 25? article image.

In general, younger drivers tend to pay more for car insurance—but once you reach the age of 25, the cost of your insurance policy can drop. According to CarInsurance.com, the average annual premium for a 24-year-old male with full coverage is $2,273. At age 25, that average drops to $1,989, a decrease of about 12.5%.

But your age is only one factor insurance carriers consider when calculating your premiums. Here's what to keep in mind if you're coming up on your 25th birthday.

How Does Car Insurance Work?

Car insurance is designed to provide financial protection against the hazards that owning and driving presents. For example, if you're involved in an accident with another vehicle, hit an object or a tree falls on your car, your auto insurance policy may pay to repair or replace your car. If you damage someone else's property while driving or hurt somebody, your liability coverage will help pay for some or all of their associated costs.

Some car insurance policies also provide other forms of coverage, such as reimbursement for a rental car if your vehicle is in the shop for a covered reason and roadside assistance.

When you apply for car insurance, you'll typically share information about yourself and your vehicle. You'll also need to decide which level of insurance coverage to get:

  • Liability coverage is the minimum that's required by law in many places. It protects other drivers on the road and kicks in to cover medical bills and repair bills if you cause an accident.
  • Collision coverage pays for repairs to your vehicle even if you're at fault for the damage, meaning you hit property, an object or another car.
  • Comprehensive coverage helps cover damage that's caused by events such as vandalism, hail, theft, fire and other natural disasters.

If you own your car outright, you have more freedom to pick and choose your insurance coverage as long as it meets the minimum legal requirement. If you lease your vehicle or are still paying off your auto loan, your leasing company or lender likely requires a higher level of coverage. Make sure you understand your obligations when choosing a policy.

The amount of coverage you get from collision and comprehensive policies is based on the value of your vehicle, but for liability coverage, you'll need to select limits for property damage and bodily injury. There's no best way to approach this, so it's important to find a good balance between the coverage amount and your budget.

When you submit your application, the insurer will base the cost of your auto insurance policy on several factors, including:

  • Age
  • Gender
  • Marital status
  • Where you live
  • Vehicle type
  • Your driving record
  • Your annual mileage
  • Your credit history (in states where that's allowed)

It's important to shop around and get quotes from multiple insurance companies because each one weighs these factors differently.

Why Car Insurance Can Get Cheaper at 25

Drivers under the age of 25 are statistically more likely to cause an accident and file an insurance claim, so insurance companies mitigate this risk by charging higher premiums. According to 2018 data from the Insurance Information Institute, drivers ages 16 to 20 are the most likely of any age group to die in a car crash, followed by drivers ages 21 to 24. With the next age group, 25 to 34, the rate of fatal crashes drops considerably.

Getting older changes one of the factors in your insurance, which may result in your insurer cutting your rates. Keep in mind, though, that policy periods typically last six or 12 months, and if you turn 25 in the middle of your policy's current term, the insurer won't change your rate. You'll either need to wait until it renews or switch to a different insurance carrier.

If you plan to wait until your policy renews, contact your insurance company to make sure that you'll get a discount when it calculates your rate for the next policy period.

Ways to Lower Car Insurance Costs

While you can't control all of the factors that go into your car insurance rate—your date of birth is set in stone, for instance—there are some that you can control. Here are some ways you can potentially lower your car insurance costs:

  • Rate shop. Shop around and get quotes online from a handful of insurance companies. Remember, each one will weigh various factors differently, and some offer discounts that others don't. It won't guarantee a lower rate, but it could help.
  • Adjust coverage and deductibles. Some car insurance companies offer optional coverage that's nice to have, but may not be worth the cost. Look for ancillary coverage that you don't truly need and could stand to cut. Also, if you have the cash, consider increasing the deductible on your collision and comprehensive coverage policies.
  • Bundle your auto insurance. Most insurers offer discounts to customers who purchase multiple policies. You may be able to save on your car insurance by bundling it with renters insurance, homeowners insurance, life insurance, motorcycle insurance or other policy types.
  • Take a defensive driving course. Some insurance companies offer a discount if you attend a defensive driving course, either online or in-person. Check with your insurer to see if it offers this option.
  • Improve your credit score. In many states, insurers might use something called a credit-based insurance score to help determine the likelihood that you'll file an insurance claim. Check your credit score and credit report to get an idea of your overall credit health. If you find areas that you can address, take action to improve your credit, which can help lower your car insurance rate.

Take your time when choosing a policy and determining the right types of coverage. Again, you'll want to try to find a balance between what you could afford to pay if you cause an accident and your current budget for the premium.

Maintain Good Credit to Keep Lower Premiums

Since your credit can be a factor in your insurance premiums, improving your credit may help you save.

Experian's free credit monitoring service can help by giving you free access to your Experian credit report and FICO® Score powered by Experian data. You'll also get real-time alerts when changes are made to your credit report, such as new accounts and inquiries. Monitoring your credit closely will give you the information you need to build and maintain a good credit score.

The purpose of this question submission tool is to provide general education on credit reporting. The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team may include it in a future post and may also share responses in its social media outreach. If you have a question, others likely have the same question, too. By sharing your questions and our answers, we can help others as well.

Personal credit report disputes cannot be submitted through Ask Experian. To dispute information in your personal credit report, simply follow the instructions provided with it. Your personal credit report includes appropriate contact information including a website address, toll-free telephone number and mailing address.

To submit a dispute online visit Experian's Dispute Center. If you have a current copy of your personal credit report, simply enter the report number where indicated, and follow the instructions provided. If you do not have a current personal report, Experian will provide a free copy when you submit the information requested. Additionally, you may obtain a free copy of your report once a week through April 2022 at AnnualCreditReport.