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Best Car Insurance for Teens & Young Drivers

There's no getting around the fact that teens and young drivers pay more for car insurance. For example, according to SmartFinancial's analysis of insurance quote data, a 20-year old can expect to pay an average of 81% more for car insurance than a 30-year old.

However, some of that extra cost can be reduced by shopping around to find the cheapest car insurance rates for young drivers, which can cost as much as 28% less than the industry average. That's nearly $800 a year in savings. Besides highlighting the importance of comparison shopping, this article will list various other things you can do to get good cheap car insurance for young drivers. 

These money-saving techniques are especially good lessons for young drivers to learn. Not only can young drivers who practice these techniques stand to benefit from lower auto insurance rates now, but they can continue to use these same tactics to save money for decades to come.

Who Has the Best Rates for Young Drivers?

Shopping for car insurance is well worth your time. The cheapest car insurance quote for a young driver is more than a third cheaper than the most expensive one. You could save over a thousand dollars a year just by choosing the right insurance company.

So where do you find the cheapest car insurance for teens and young adults? Don't assume that the company with the best rate for your parents will be the cheapest for your needs. Rate quotes depend on the specific situation and change all the time, so your best bet is to get fresh information by using SmartFinancial's rate finder tool.

Below, SmartFinancial compiled quotes for 20-year olds from various insurance companies. The range of prices should give you an idea of how much you should expect to pay. Your rate may also vary depending on whether you have state minimum coverage or full coverage.

Cheapest Car Insurance Companies for Young Adults

Insurer

Yearly Premium for a 20-year-old Driver

American Family

$1,980

Auto-Owners Insurance Co.

$2,052

State Auto

$2,304

Farmers

$2,328

Direct Auto

$2,412

Allied

$2,484

Safe Auto

$2,508

USAA

$2,544

Nationwide

$2,568

Erie

$2,628

Travelers

$2,628

Allstate

$2,664

Encompass

$2,676

State Farm

$2,676

Chubb

$2,772

Esurance

$2,808

Metropolitan

$2,820

Unitrin

$2,988

Mercury

$3,060

Hanover

$3,084

SmartFinancial.com used quotes from 20 different companies to insure a 20-year old driver for the first time.

What Age is a Young Driver?

Since insurance rates are based on risk, the higher risk posed by young drivers means they pay an especially high price for car insurance. According to the US Centers for Disease Control and Prevention, motor vehicle crashes are the second leading cause of death among American teenagers. On average, in 2019 seven teens a day died in car crashes, and hundreds more were injured. Teen drivers are nearly three times as likely as older drivers to be involved in a fatal crash.

The cheapest car insurance quote for a young driver is more than a third cheaper than the most expensive one.

Experts agree that rates are generally significantly cheaper by the time you reach age 25 as long as you keep your driving record and credit score clean. In general, insurance rates go down over time and then rise again when you reach the age of 65

On average, you can expect to pay about $2,720 a year for insurance at age 20, but only about $1,503 per year by age 30.  

The table below shows how average insurance premiums drop year-by-year as you move from age 20 to age 30:

Age

Average Annual Premium

20-Year-Old

$2,719.92

21-Year-Old

$2,372.28

22-Year-Old

$2,116.44

23-Year-Old

$1,958.88

24-Year-Old

$1,862.88

25-Year-Old

$1,723.20

26-Year-Old

$1,632.72

27-Year-Old

$1,617.00

28-Year-Old

$1,547.64

29-Year-Old

$1,521.48

30-Year-Old

$1,502.88

How Life Events Affect Auto Insurance Costs as a Young Driver

Besides your driving record, there are a variety of events and changes in a young adult's life that affect car insurance for teens and even college students. Understanding what affects your car insurance rate can help inform some of the choices you make. Here are a few examples:

Living on Campus

If your school is more than 100 miles away from your home, you could qualify for what's known as an "away from home" or "resident student" discount if you decide not to bring your car on campus. The insurance company recognizes that you'll be putting less miles on the car while you're away from it. 

If you decide to take your car to college, you certainly won't qualify for an away-from-school discount. In fact, the cost of your insurance might actually go up depending on where you go to school. For example, say your parents live in a rural, low-crime area and you go to college in a big city. The city is likely to represent a bigger risk to the insurance company, and this could raise your insurance premiums. On the other hand, if you live in a big city but go to college in a more secluded area it could lower your rates. .

Another way to be eligible for a car insurance discount as a student is if you earn good grades!

Moving Out of the House

If you've been benefiting from having your car insurance bundled with other policies of your parents, you'll probably lose those savings when you leave home. Young adults also don't typically live in a nicer area than their parents, and your neighborhood affects your car insurance rate. 

If you are moving away from family, see if you can bundle your renters insurance with your car insurance policy for a discount.

Teen drivers are nearly three times as likely as older drivers to be involved in a fatal crash.

Renting vs. Buying a Home

Just being a homeowner could qualify you for a discount on your car insurance, especially if you bundle your car and homeowner's insurance policies. Homeowners often have better options for storing their vehicles than renters do. For instance, garaging a car is safer than on-street parking. The location and crime rates of your neighborhood matter too. If you live in what's considered a high-risk area, expect to pay more for car insurance. 

Living with Roommates

To share the cost of moving out of your parents' house, you may decide to get a roommate. However, before you choose a roommate you should consider how it might affect the cost of your car insurance.

Having a roommate could affect your insurance premiums positively or negatively. If your roommate also has a car, you may be able to bundle the two policies so each of you gets a discount.

On the other hand, if your new roommate has a lousy driving record, sharing a policy could raise your rate. In that case you might want to keep your policy separate. You may also exclude that driver on your car insurance policy to ensure that they don't negatively impact your rate by just living in the same home. However, if you do exclude your roommate, never let them borrow your car because they will not be covered in an accident.

Marriage and Car Insurance

All things being equal, getting married should lower your car insurance. However, there are situations where it could easily go the other way. 

Marriage generally can lower your car insurance in two ways. First, insurance companies tend to view married people as being more stable and thus less risky. In the insurance world, lower risk means lower premiums.

Second, if you and your spouse both have cars you should qualify for a discount by bundling the policies.

Where problems can arise is if your spouse represents a significantly higher risk than you do. In that case, combining the policies could actually raise your rate. For instance, this could happen if your spouse has a bad driving record or a bad credit score.

Compare Insurance Rates for Teens and Young Drivers

Do You Need Your Own Car Insurance Policy in Your 20s?

Because young drivers are considered a high risk, it is generally cheaper for parents to carry them on their car insurance policy. But at what point do young drivers need their own car insurance?

In theory, parents can carry their children on a car insurance policy as long as a parent's name is on the title of the car. As a practical matter though, once kids grow up, move out and start supporting themselves, it's easier to separate financial affairs such as vehicle ownership and insurance policies, especially when insurance rates begin to drop. 

What Type of Auto Insurance Coverage Does a Young Driver Need?

Just about every state requires all vehicle owners to carry liability coverage to pay for damage they do to other vehicles and passengers. Beyond that though, drivers have choices of additional types of coverage. The idea is to match your coverage with your car and your driving habits.

Collision coverage pays for damage to your car in an accident if you were at fault. Comprehensive coverage pays for other types of damage, such as vandalism, theft of a car or hitting a deer. 

Your decision should be based on how expensive your car would be to fix or replace. An expensive car should have these additional types of coverage or else a simple fender bender could leave you with huge out-of-pocket costs.

On the other hand, if you're driving an old beater that's almost on its last legs anyway, you may decide to do without the additional coverage. 

In addition to protecting your car, also think about medical payment coverage. This can be especially important for younger adults who may not have very robust health insurance.

Rates are generally significantly cheaper by the time you reach age 25 as long as you keep your driving record and credit score clean.

How Young Drivers Can Save on Car Insurance

There's more you can do to lower your car insurance rates than simply wait to get older. Some tips for lowering your car insurance premiums are listed below.

Take safe driving classes

These classes go beyond simple driver's education to teach effective defensive driving tactics. Insurance companies recognize the value of these courses and will often offer discounts for those who complete them. 

To make sure you qualify, check with an insurance agent to find out what types of courses they recognize as worthy of a discount. 

Sign up for telematic monitoring

You can agree to allow your insurance company to use an app to monitor how you drive. This includes measuring speed, sudden stops, the amount you drive and other risk factors.

If you demonstrate that you drive safely, it could lower your insurance rates. Just be confident that you can practice good driving habits before you sign up. 

Establish good credit

Bad credit is viewed as a risk factor by insurance companies. There are many reasons a young adult should establish a positive credit history, and lowering your insurance rates is one of them.

To establish good credit you have to use it regularly but not excessively. When you use credit, be sure to make your payments on time and in full so that use counts in your favor rather than against you.

Choose your car wisely

Some cars cost more to insure than others. This is about more than just how expensive the car is - though that's certainly a big part of it. The type of car's safety record and tendency to get stolen are also factors. 

When choosing a car, it helps to know how much it costs to insure certain models. The difference in rates could determine what kind of car you can best afford. 

Pick a coverage level appropriate for your vehicle

Three decisions about coverage will have a lot to do with how much you pay for insurance:

  1. What type of coverage (liability, collision, etc.) you get.

  2. What your coverage limits are.

  3. What your deductible is.

Your insurance needs are based on what kind of car you drive, how old it is and what shape it's in, and how you use it. 

Shop around and compare quotes

Whatever level of insurance you get, remember that prices vary greatly from one insurer to the next. Also, the company with the cheapest rates for your parents may not have the best rates for young drivers.

By comparing car insurance rates from multiple insurance companies, you'll have your best chance at finding reasonably cheap full coverage car insurance for young drivers.

Best Car Insurance for Teens and Young Drivers FAQs

Should young drivers be named on their parents' policies?

This is probably the most cost-effective approach for very young drivers. It becomes less practical as young adults move through their 20s and become more independent, but by that time they should be starting to see their insurance rates coming down anyway.

What type of coverage does a young driver need?

Liability coverage is required in most states, and some states require PIP insurance. Coverage for medical payments may be important, unless the young driver already has very strong health insurance. Collision and comprehensive insurance are nice to have, especially for more expensive cars, but will raise the cost of premiums.

Where can I find rate quotes for a young driver?

SmartFinancial's rate comparison tool is designed to allow you to shop for rates that are tailored to your profile to find the best coverage at the lowest rates. 

Find Cheap Full Coverage Car Insurance for Young Drivers

As a young driver, you pay way more than others for car insurance. Even so, there are things you can do to bring your rates down, including keeping a clean driving record, buying the right car and choosing the right coverage. However, the best way to find cheap car insurance for young drivers is to shop around and compare rates. Just enter your zip code below and answer a few questions to get free car insurance quotes that match your profile. You may save hundreds of dollars!

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