How Does Age Affect Car Insurance Costs?
There are over 6 million passenger car accidents in the US every year, and this number is expected to increase in the coming years. So it’s a no-brainer that insurance rates have been rising and will continue to do so. But why are car insurance rates so susceptible to small factors as well? How do different factors affect auto insurance rates and is there a way to counter this change?
This article will describe how age affects car insurance costs, which is the age group that gets the most benefits and which gets the worst of it. And most importantly, is there a way to reduce the cost of insurance rates? Let’s get started.
How Auto Insurance Works
There is no one-size-fits-all price range for auto insurance, making it unique. Imagine walking into an ice cream shop and paying more for the same ice cream. That would be considered unfair, right? So why is it that insurance companies charge more to some people for the same auto insurance policy that others get for cheaper? This is because insurance companies are not selling you auto insurance policies, but they are charging you for taking your risk!
In case of an accident, the insurance company will pay for the repairs and medical treatment after you’ve paid the deductible. If not for the insurer, you’d have to pay an enormous amount. So when you buy an insurance policy, the company is taking your portion of the risk. If you cause an accident, they are liable to pay.
This is the reason why insurance companies consider every possible factor that can increase the risk of a policyholder making a claim. Not just that, but they also make sure that the policyholder pays the insurance premium on time. Insurance companies make sure that their chances of paying for an insurance claim are low, while the chances of getting premium payments are high.
How Does Age Affect Your Car Insurance Cost?
Out of the countless factors that the insurance companies consider, age is one of the most impactful ones. Of course, there are some more obvious and impactful factors, such as your driving record, past insurance claims, type and make of your car, etc. Age will drastically change the price of your insurance policy.
One would assume that a car insurance premium is cheaper if the age of the policyholder is young, as is the case with medical insurance. But it’s quite the opposite here. Auto insurance rates are higher for younger people, and as their age increases, the prices go down.
People who are 16 years old will have to pay the most for insuring their car. As the age increases, the prices go down. But this is not steady. After the age of 60, the cost of auto insurance starts increasing again.
People who are over the age of 16 but under 30 will have to pay the most for auto insurance, with prices declining steadily as age increases. People who are over 30-years old and below the age of 60 pay the lowest prices for insurance policies. People who fall in the 35-55 years old bracket pay the lowest when it comes to the age factor. But as the age increases over 60 years, the prices also start to increase.
Why does Age Affects Car Insurance Rates?
Why is it that age affects your car insurance rates? Let’s say that even if a person who is 18 has never gotten as much as a speeding ticket, why do they have to pay more for auto insurance? It all comes down to the risk factor that we mentioned above. Statistically, people who drive recklessly, get into the most accidents and are most likely to get a speeding ticket are teenagers. Younger people are inexperienced in driving, and they have a knack to go against the rules.
This is why insurance companies charge more to people who are in their teens. But as they grow old and garner more driving experience, and more maturity, the prices go down. The sweet spot where age and driving experience are at their peak is the 45-55 years of age. This is the lowest-risk group for auto insurance companies, not to mention these people are also highly likely to keep paying premiums compared to teenagers and college students.
Hence, people in the mid-forties and fifties enjoy lower insurance rates. But what happens when one crosses the age of 60? Some insurance companies might charge more to people who are over the age of 55 unless they take a safety driving course and prove that they can drive well. But after the age of 60, auto insurance prices will inevitably go up.
This is due to the cognitive and physical decline people experience after the age of 60. They are more likely to damage their car or get in an accident if they are still driving after the age of 60. Most people after their sixtieth birthday get insurance and add someone else as their driver. This could help in the reduction of the price.
How to Counter the Price Hike?
If you are below the age of 30 and want to save some money on auto insurance, there are a few ways you can do that. Of course, you can’t change your age, but what you can change is your driving habits. Drive safely, get students discounts, get a defensive driving course (if your company allows discounts after that), and pay premiums on time. All these practices will bring down the cost of your auto insurance policy and help you save some money.
This article has been published in accordance with Socialnomics’ disclosure policy.