Age is a very significant factor in premium calculations, especially for younger applicants. As you gain more driving experience and mature as a person, your auto insurance comes down about 11% at age 25, providing you have no recent accidents or traffic convictions in your record. But age 25 is usually the last time drivers see significant drop in their vehicle insurance due to age so it is considered a milestone. Afterwards, premiums start levelling out with inconsequential change with every passing year.
Teenagers are the highest risk driver group and therefore they pay the highest car insurance premiums. A 16-year-old driver is charged more than three times higher premiums on average in comparison to a mature driver. However, rates start coming down significantly with each passing year without a traffic ticket or accident until the age of 25 and then settle down. All being well, between 25 – 35 your premium may only go down about 10% and that is hardly noticeable in comparison to dropping down to only one third between 16 – 25.
Most people get their driver’s licenses in their teens and start driving their parents’ automobiles. Over the years, they gain plenty of experience and move out of the highest risk group and into more reliable driver, who is less likely to make a claim. Along the way, they see better rates for every passing year. However, if you just got your driver’s license or had an at fault accident last year, you will be kept at higher rates even if you turn 25 this year. Automobile insurers like to see at least 3 years of clean driving records before they can offer significant discounts.
Why Is the Significance of Age Twenty-Five?
Younger drivers are a huge exposure for underwriters because of certain tendencies and inexperience in life and motoring. According to CDC, younger drivers are more likely to travel at night, ignore seatbelts, speed, text and drive while intoxicated. In time, they learn to slow down and observe the road ahead and others. The ones who learn from near misses turn out fine by 25.
You don’t arrive to this age overnight and that learning curve makes you a wised-up motorist who deserves good rates. 25 is commonly agreed upon age to be some sort of a crossover point where you are assumed to be a more reliable driver.
Also, most vehicle insurance companies set age limits and it is usually 25 when they are considering a particular risk. For example, many carriers may not insure any driver or don’t allow occasional drivers under twenty-five with sports cars. That makes their preference pretty clear and just being accepted tells you that otherwise the charges would have been ridiculous.
Another significance of age 25 in terms of car insurance is that the premium gap between male and female drivers drops down to a negligible amount. Teenage male drivers are considered higher risk than females and get charged about 10 – 12% higher premiums. This gap closes quickly and becomes insignificant, although ladies may still get better rates.
Finally, older drivers are likely to get over the risk-taking phase in their lives and settle into calm, considerate and responsible patterns. Then, there is very little they can do to improve and therefore carriers slow down rewarding them after a certain age, which is widely accepted in the vehicle insurance industry to be 25.
Actually, it may be a smart strategy to align your auto insurance policy with your age so that you can get the best rates possible. For example, if you renew your policy just after hitting your next birthday, you could qualify for better rates earlier. Getting coverage at 17 instead of 16 would reduce your premium by about 15% according to Valuepenguin. The same strategy could be applied to other major events like getting married, buying your home and moving closer to work.