You've just made it to the best insurance year of your 20s! Congrats!
Hitting your 25th year of life is a big deal. You’re not only able to rent a car without an additional fee, but you start to see some car insurance savings as well. On average, turning 25-years-old can save you nearly $300 a year. Still, no matter how much savings you receive, you’re still probably paying more for car insurance than you want to. With that thought in mind, let’s break down some cost cutting solutions. Starting first with explaining why you might be paying so much in the first place and ending with how to save.
While there are a lot of things that make up your car insurance premium, there are a handful of things that really impact it. The vehicle you drive, your location, your driving record, and your credit score all have major implications on what you pay for car insurance. Let's explore.
This is a pretty obvious rating factor for car insurance. Your car insurance is naturally designed to cover the vehicle. The general rule of thumb for car insurance is the higher your MSRP is, the more expensive your insurance will be. If you're looking to save on insurance, consider a moderate sedan rather than a new BMW or Pickup truck.
Your insurance premium is calculated based on your zip code but is regulated by your state. Meaning, your state and your zip code play a big role in what you pay for auto insurance. If you live in an area near the coast, such as in Louisiana, you can expect the threat of floods to cause our premium to be higher.
If you live in Michigan, your state’s no-fault insurance system and high requirements of Personal Injury Protection cause your premium to be quite high.
Annual Premium for the Most Expensive States
In addition to your age and driving record, your credit score is a major rating factor for your premium. Drivers with a high credit score, specifically above 823, pay half as much for car insurance than drivers with a poorer score (less than 524). There are a few reasons for this. Studies have shown that drivers with low credit not only file more claims than drivers with high credit, but payouts tend to be more expensive to an insurance company. Thus, car insurance companies will cover themselves for the predicted losses through higher premiums.
Average Annual Premium Based on Credit Score
You can expect your car insurance premium to be high if you’ve had at-fault accidents, tickets, or any other type of violation. Most insurance companies will rate (i.e., charge) you for a 3-year period for any of these types of infractions. Meaning, if you had an at-fault accident last year, you will still be paying for it this year. Keeping a clean driving and claims record is imperative to a low premium.
|Speeding 11 - 15 MPH Over Limit||$141|
|Speeding 16 - 20 MPH Over Limit||$153|
|Speeding 21 - 25 MPH Over Limit||$165|
As you can see, having these violations on your driving record can be exceedingly costly.
Now that we’ve outlined why car insurance is so expensive at 25, let’s outline some ways you can save on your coverage. Starting first which insurance company is the cheapest for you.
In order to really examine car insurance coverage for 25-year-olds, we created a generic profile outlined here and examined 5 different insurance companies across 5 different zip codes to determine the winner. And spoiler alert: it’s Progressive. Here is the overall data.
Our Findings: Car Insurance for 25-year-olds
|Location||State Farm||All State||Geico||Progressive||Liberty Mutual|
Just as a heads up, our driver profile likely won’t match yours. Still, you should consider our data as a jumping off point – beginning but not ending your search for car insurance with Geico and Progressive insurance companies.
While many people are going through different life changes at 25, there are some general discounts we want to highlight as we explore cheap car insurance.
On average, 25 is the last year you can qualify for these types of discounts. The former entails being a full-time student and having a 3.0 (B) GPA or above. The latter requires taking a professional driving course which your car insurance company must pre-approve for the discount to qualify
Average Savings for Good Student and Good Driver Discount
If you’re living on your own, you most likely have a renter’s, condo, or home insurance policy. If you do, you should bundle of your residence and car insurance policies together to get the coveted multi-policy discount. On average, this discount can save you $107/year on your car insurance policy but will also give you some savings on your corresponding policy.
Average Savings by Bundling by Dwelling
|Renter Discount||Condo Owner Discount||Homeowner Discount|
Insurance companies are beginning to use telematics to determine your premium through the concept of “usage-based car insurance.” Basically, a plug-in device monitors your driving habits in order to determine a more personalized premium. While it varies by device-type, it can account for driving speeds, turn speed, and other habits. If you have a clean driving record and are generally a safe driver but have outside factors working against you (such as your age or credit score), this might be a good option to lower your premium.
|Progressive's SnapShot||Average of $130|
|Allstate's Drivewise||Average of 10-25%|
|State Farm's Drive Safe & Save||Up to 15%|
|Nationwide's SmartRide||Up to 40%|
|Liberty Mutual's RightTrack||Average of 5-30%|
As we’ve outlined above, having at-fault accidents on your record can be financially devastating to a low premium. Most car insurance experts will advise that you only use your insurance when the total monetary value is too great – basically, if you total your vehicle or have major damage to it. Here’s how you can tell.
By claims, we’re specifically referring to collision damage you cause to your vehicle. For things like liability or bodily injury, you are not allowed to pay out of pocket if the injured party does not want to. Also, comprehensive claims typically don’t affect your rate as much as collision claims do as they’re primarily seen as outside of the control of the driver.
While the amount you can be charge does vary by your insurance company and your state, here is the average premium increase you can expect. On average, you can save nearly 50% by dropping collision and comprehensive coverage
Average Increase after at At-Fault Claim
|Increase at 6 months||Increase at 12 months||Increase at 3 Years|
By this, we are referring to the same truth that the value of your vehicle depreciates over time. So, the insurance coverage you once had on your 2000 Honda Civic Coop might not be worth the premium you are paying for it. A general rule of thumb in the insurance world is if the value of your vehicle is less than $4,000, you might not need your collision and comprehensive coverage.
Average Annual Premium by Coverage Level
|Coverage Level||Average Annual Premium|
If, however, you still want to keep this coverage but want another way to lower your premium, consider raising your deductible. When you raise your deductible, you lower your premium by taking a greater amount of financial responsibility from your insurance company in the event of a claim.
Because there are many variables that go into your car insurance premium, it’s important to look at different companies every 6 months. When you have a birthday, get a new vehicle, or experience another life event, you should look at these moments as great opportunities for new car insurance savings. Use our car insurance calculator here to see how much you could be saving.
Being 25 is a pretty big milestone for car insurance. While you’ve officially hit the biggest year of savings, but still have a lot of room to save. Starting your search with Geico and Progressive, as well as considering our discount suggestions, keeping your credit score up, and shopping around for car insurance every 6 months are great ways to save.
Didn't find what you were looking for? See our additional articles here for more ways to save on car insurance
We randomly selected 5 zip codes in 5 different areas across the US by using the 5 most popular companies in the US based on net premiums written. Here are the zip codes we selected:
Next, we needed to create the profile of the 25-year-old driver. Here is the information:
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