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What are the car insurance rates by age and gender?

What are the car insurance rates by age and gender?

Is there an age or gender gap when it comes to pricing for car insurance policies? Do women pay less than men, and does it matter what age you are when purchasing a policy?

Determining car insurance rates by age and gender might seem unfair, but studies prove that age is undoubtedly a significant factor for car insurance providers, and so is gender. 

Car insurance customers are typically divided into the following segments:

  • Under 25
  • Aged 25 – 29
  • Aged 30 – 59
  • Families
  • Mature aged drivers (over 60)

Among all these segments, it is the under 25 age group who are the most expensive to insure, more so if they are male. Let’s find out why that’s the case.

Why is car insurance expensive for young drivers?

You did well in your driving test and now are shopping around for a car of your own when you realise that purchasing car insurance will set you back by up to several thousands of dollars annually. This isn’t because car insurance companies are out to make life difficult for drivers under 25.

The car insurance industry relies heavily upon being able to predict the likelihood of a driver having an accident once they are insured. And in this matter, young drivers do poorly as proven by data collected by insurers themselves and other authorities.

The many reasons young drivers are considered a greater risk include:

  • Lack of experience in handling a car and reacting to unexpected situations
  • More impulsive and likely to take risks while driving
  • Greater chances of alcohol and drug use before driving
  • Risk of making errors of judgement 

It is unfortunate that all young drivers get slotted in this category when it comes to insurance rates. Responsible young drivers are not rewarded for their behaviour, and they have to deal with the same risk assessment as the irresponsible ones.

To make matters worse, as they have started driving recently, there is no prior driving record of a particular individual within this age band. Insurers are left with no option but to look upon young drivers as a category instead of as an individual and price their car insurance rates by age, based on the prevailing driving patterns of the age group.

If you compare the average car insurance rates by age, the worst hit are younger drivers aged under 21 who shell out the highest annual premium – $1,608 compared to the national average of $952.

How does gender impact car insurance rates?

Statistically, men have been shown to be riskier drivers – they are more likely to take chances and get involved in more car accidents and also attract more traffic violation penalties, especially when they’re young. They naturally cost insurers more at the time of claim, and hence are charged a higher premium, about $80-90 more than women at the time of purchasing their car insurance policy.

What are the types of car insurance for drivers under 25s?

It’s illegal in Australia to drive a car without Compulsory Third Party (CTP) insurance, and this insurance is payable at the time of registering your vehicle.

Once you have CTP, you are not legally bound to take any more insurance products, but it is unlikely that a new driver will hit the roads with just the CTP. Here are a few additional covers that you can consider.

  • Third-party car insurance for under 25s: covers repair costs to other vehicles in case of an accident.
  • Third-party fire and theft car insurance for under 25s: covers your vehicle against fire and theft, along with other vehicles.
  • Comprehensive or full cover car insurance for under 25s: complete cover for third party claims, fire, accident, weather and damage to your car.

Young drivers also have the option of driving their car on a parent’s policy for more affordable car insurance, but this could lead to the insurance premium increasing. This option is ideal for teenage drivers who are yet to purchase their own vehicles and who are still driving their parents’ car.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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