FAQ: Why is Car Insurance so High for Teenagers?

Being a teenager is wonderful because you can experience new found freedoms and responsibilities courtesy of a driver’s license. Parents however, may experience a little tension regarding this matter as auto insurance rates for teenagers is so high. There is a reason why car insurance is so high for teenagers, and it boils down to simple statistics.

Q: Why Do Teens Pay So Much?

When purchasing car insurance, you will be evaluated statistically to help gauge the level of risk you pose. Based on this risk assessment, the insurance company will charge premiums to help offset the costs they may eventually have to pay on your claims. Some factors that are weighed in this formula are:

  • driving history
  • age
  • gender
  • profession
  • credit history
  • location

All this is included in the process insurance companies use to determine the premium rate for teenagers. Historically, teenagers have experienced higher than average rates for crashes (both nonfatal and fatal) compared to other age groups.

Teens age 16-19 tend to drive less miles and have fewer driver licenses compared to other demographic groups. Teenagers also have the least amount of overall driving experience, and insurance companies generally charge less to those who have been licensed for three or more years. Additionally, since credit history can affect your insurance rate, (the better the credit score, the more responsible you appear to insurers) it’s rare for a teenager to have any credit history to help lower their car insurance rates. Teenage drivers also have a higher fatality rate compared to other drivers on the road. The insurance companies are willing to insure teenagers for a steeper fee to help offset their risk when insuring this group of drivers.

Save on Teenage Car Insurance Rates

If you are a parent who will soon have a teenage driver, some tips you should follow to save money on your auto insurance premiums are:

  • Comparison-shop for the best deal possible
  • Cover your child under your existing insurance policy to save money
  • Encourage your child to get excellent grades to get a discount
  • Be patient as insurance rates for your teenager will drop as they get older

Make sure you budget wisely and only purchase a vehicle and insurance for your teen when they absolutely need it. Otherwise, catching rides with friends or taking public transportation is the normal route teens take.