4 Aspects of Auto Insurance Costs for Student Drivers

06/03/2015 05:32 pm ET | Updated Jun 03, 2016

By the time we get our first car, most of us are thinking "how can I afford one?" Most young consumers will fall into the trap of considering only the short-sighted costs - paying down the actual car. Considering your auto insurance rates, however, is just as vital. On average, an 18-year-old driver in the United States will pay $5,411 for a standard auto insurance policy, on an annual basis. At this rate, in 4 years' time you would have probably spent more money paying this insurance, than for the car itself. In order to save money, and shop wisely, student drivers should equip themselves with as much knowledge as possible. Here I will outline 4 crucial points all student drivers should consider, which have a tremendous impact on the costs of their auto insurance policy.

  1. Staying on your parents' policy. Many new drivers will be faced with a dilemma: should they stay on their parents' policy, or simply get one of their own? The answer to this question will depend on how one feels about the factors involved. Staying on one's parents' policy will open them up to greater coverage limits, which will reduce the costs in the event of an accident. However, at the same time, parents take on tremendous risk by allowing a young driver to stay on their policy. Namely, their original premiums will skyrocket in the event of any moving violations or accidents the young driver is involved in. This comes down to a discussion between you and your parents.
  2. Auto Insurance Discounts. Paying $5,411 per year for auto insurance is no joke - especially for young adults, who tend to have lower incomes than other age groups. This is why it's important to understand that you have a lot of control over the cost of your premium. Certain insurance companies will provide various discounts, to help ease this burden. For example, State Farm, Allstate and GEICO all provide discounts for 'good students'; you have to generally maintain grades above a B, and remain in good standing with your school. Some of these discounts can last until you are 25 years old, at which point most drivers can expect a reduction in the cost of their auto insurance.
  3. How much coverage should I get? The cost of your auto insurance will vary depending on the amount of coverage you get. It is tempting, therefore to simply elect to sign up for the bare minimum required by your state's law, and in turn pay the lowest possible premiums. However, most experts agree that this is not the right mentality to have. Kris Kirchner, President of First Florida Insurance Network of Central Florida, urges drivers to find a balance. You should elect to have as much coverage as you can reasonably afford. Things like discounts or staying on your parents' policy may help deal with the costs, and allow you access to higher limits. These limits will be important in the event of an accident, because that is what your insurer will pay out for any damage you cause in an accident. You'd be on the hook for anything above your policy limits
  4. Shopping around. Prices for auto insurance vary wildly. While in general, it is true that young drivers will pay more for their premiums than most other portions of the population, it doesn't mean there isn't room to shop around. Do not allow yourself to be shoehorned into a policy based on the first ad which comes through in your mail. The good news is, it is easier to find cheaper car insurance with age. Our research has found that, on average, 16 year olds can expect to pay $8,226 annually. By the time they reach the age of 25, that average drops to $2,374. Remember that these are just averages. It is possible to pay more or less than these figures, at any given age. If possible, you should strive to pay no more than the average cost for your age bracket, in your given region.

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