Why Is Auto Insurance So Expensive For Young Drivers?

If you’re a young driver setting up for your life as a motorist and you find yourself feeling a little stressed about auto insurance rates, then you’re a completely normal human being.

Beyond researching and paying for that first car (and its maintenance and fuel), young drivers with a clean record in the USA can also face insurance rates more than triple those of their parents.

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During these formative years at the wheel, you’ll work to earn a clean driving record which will save you money in the long term, while also building good credit by paying your premiums on time. While numerous variables affect everyone’s auto insurance rates, young drivers tend to be under particular financial stress when it comes time for that monthly car insurance bill.

Why is that?

It comes down to risk– something your insurance company is expert at measuring.

Car accidents are dangerous and extremely expensive, so drivers more likely to be involved in accidents pay more for insurance as a result.

According to CDC data, drivers aged 16-19 are almost 3 times more likely to be involved in fatal crashes than drivers aged 20 and older, with inexperience and a higher propensity for risky behaviors noted for the youngest drivers. 

Motor vehicle crashes were the leading cause of death for U.S. teens in 2022, just a year after hundreds of thousands of teens aged 13-16 were injured in motor vehicle accidents.

“It is true that young people pay much more for car insurance” adds Ray Blackburn, an insurance expert with Toyota Insurance.

“There are several reasons for this. One, young people may drive more recklessly than more experienced drivers. In addition, young drivers tend to be more distracted by their cell phones (for instance, texting), or paying attention to their friends in the car instead of concentrating on the road ahead. Finally, even good young drivers are simply inexperienced, and like anything else, they will improve with practice. They will have learned not to trust their rear-view mirrors, will be more careful about checking their blind spots, and will drive more defensively overall.”

Traffic tickets and accidents can stay on your driving record for years, and for a young driver, just a single infraction can mean a major spike in premiums for years to come.

But that doesn’t mean you can’t save a few bucks.

“There are several ways that young people can save on insurance” says Blackburn. “The most important thing is to be a careful driver, as driving violations and accidents will almost always result in even higher insurance premiums. Getting a good report card helps too, because this shows insurance companies that you are responsible and to be rewarded with a ‘good student discount’.”

Paying your bills and working to improve your credit score are important too. “Most insurance companies use credit scores when rating their customers,” says Blackburn. “It may not sound intuitive, but there is a direct correlation between credit score and insurance risk, as the math proves that being careful with your finances means you’re also careful behind the wheel of a car.”

As a young person, you can prove that you are a safe driver by enrolling in the insurer’s usage-based (also known as telematics) insurance program. You will need to install an app on your phone, and the app will analyze your driving habits and report them to the insurance company. Driving smoothly, avoiding speeding, and staying off the road late at night on weekends can result in tremendous savings to a young person’s insurance premiums.

According to Blackburn, customers are often surprised by how much of a discount they’re able to get, 20 percent or more with a little effort.

Next, be sure to understand your insurance needs. There are at least a half-dozen individual components to auto insurance, only some of which are mandatory. This varies by state, so be sure to contact a broker to help guide you through the specifics where you live.

Your choice of vehicle can play a significant role in what you pay for insurance, too.

Newer cars tend to have higher insurance rates, but some include safety features that lower accident risk and pull rates back down. More expensive cars are typically pricier to insure, as are large vehicles (trucks and SUVs) as well high-performing vehicles (sports cars), and cars more likely to be stolen.

“The choice of vehicles impacts a young person’s rates, and in general, higher value and higher performance vehicles equate to higher insurance costs” notes Blackburn.

“A young person driving an expensive, high-performance car is a much greater risk than a more experienced driver in the same car, and insurance companies know this based upon the mountains of data they have on their customers, and some very complicated multi-variate math. If a young person buying a new car wants to keep insurance prices as low as possible, safe and boring are the best choices. Used cars are better buys, as the total value of a used car is generally less than a new one.”

Finally, be sure to check for available discounts for using winter tires or taking a driver’s education program, and if you’re still in school, check to see if any student discounts are available. And remember: with a clean driving record, you’ll start to see insurance premiums drop within a few years.

It’s a great idea to consider rental car coverage as well, especially if you rely on your car to get to and from work. According to Blackburn, it’s best to know you’ve got this coverage if you need it, before you need it.