Why is car insurance for under 25 drivers more expensive?

Drivers under 25 may have noticed that car insurance can cost more for you than for those older than you. So, why is this the case?

Unfortunately, road accident statistics are stacked against you. Put simply, the younger you are, the less road experience you have. In fact, the most common profile of drivers causing or suffering severe accidents are young men between 16 and 24 years of age.

This may result in younger Australians being charged higher car insurance premiums in some instances. However, there are ways you can lower these costs. 

Why car insurance can be more expensive for drivers under 25

According to the NRMA, young drivers in Australia are considered ‘high risk drivers’ by insurance companies. In fact, young drivers (17-25 years old) represent a quarter of all Australian road deaths despite being only 10-15% of the licensed driver population.

The premium, or cost of your car insurance policy you will pay is directly impacted by your risk profile as a driver. Generally speaking, insurers charge higher premiums for riskier policyholders, and vice versa for low-risk policyholders. 

The insurer will collect details about you to create a profile of the type of driver you are, such as: 

• Your age
• History of accidents
• Any demerit points gained
• Make and model of vehicle
• Where the vehicle is stored

This is done to quickly categorise the type of driver you are, and your likelihood of needing to make a claim. 

Unfortunately for young drivers, being aged under 25 puts you in this higher risk category for accidents. Therefore, you may be more likely to pay a higher premium. 

How much can car insurance cost for drivers under 25?

According to CHOICE, young drivers aged 21-24 pay on average around $1,750 for comprehensive insurance. This is almost double that of adult drivers aged 45-65 who pay $890 on average.

That being said, the premium you may pay can depend on a lot more than just your age, gender, or where you live. It is also affected by the type of car insurance policy you buy, the number of insurance claims you’ve filed previously, the make, model, and age of your car, and your driving experience. 

For example, a 23-year old man driving a brand new car in Sydney is likely to pay much more than a woman in her 30s living in Perth and driving a second-hand model.

In general, insurance providers need to know that you’re a reliably safe driver unlikely to get into an accident. As you get older and have more driving experience with fewer accident claims filed, your premium will likely decrease. 

When choosing your car insurance it may be worth shopping around for quotes. Compare policies offered by different insurers to see by how much their quotes differ, so you can try and find one that suits your budget

How can drivers under 25 lower the cost of car insurance?

Family policy

If you’re living with your parents or siblings older than 25, you may find that your car insurance costs less if they are listed as the primary driver on the car insurance policy, and you as an additional driver. 

This works out cheaper even considering that adding drivers under 25 to a policy can mean extra costs, like an additional excess -which is the part of the claim amount paid out of pocket.

Higher excess

You may also be able to bring down your car insurance premium by choosing to pay a higher excess, sometimes called voluntary excess. However, you should check with your insurer if you may be liable for other kinds of excess, which will add to what you pay out of your pocket.

Safety first

For drivers under 25, driving a smaller, more commonly sold car model can also help bring down the car insurance premium, as can building up a history of insurance claim-free driving. You may also be able to convince the insurance provider to charge you less for car insurance by taking a defensive driving course.

What should drivers under 25 look for when comparing car insurance quotes? 

Before you start looking for car insurance suiting your financial situation, consider looking at your driving circumstances carefully. For instance:

1. Do you drive a car that’s expensive to repair, or easy to replace?
2. Are you planning to drive a lot, or can you make do with borrowing your parent’s car a few times a week?
3. Is it likely that your car can be vandalised or otherwise damaged?

The answers to such questions can help you decide on the right car insurance policy for you, and help you avoid buying an expensive policy that may be necessary for you.

You may also need to look at the coverage limits and exclusions as well to make sure you’re not overlooking any unexpected costs. You may also want to consider not just checking car insurance quotes online, but also buying the policy online, as you might get a discount for doing so.

While you may not find an insurance policy customised for a driver under 25 like yourself, you can try to get a policy that’s at least most suitable for the kind of driver you are and the amount of driving you plan.

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