Youth and inexperience are two different things, and if you are
16, your car insurance company will penalize you for both.
A newly licensed driver -- no matter how old -- usually will pay
what's known as an inexperienced operator surcharge of as much as
20 percent for as long as three years. It drops a bit at each
renewal period. Here's how one Pennsylvania insurer prices the
extra risk:
|
Months licensed
|
Surcharge
|
| 0 to 5 |
10 percent |
| 6 to 11 |
8 percent |
| 12 to 17 |
6 percent |
| 18 to 23 |
4 percent |
| 24 to 29 |
3 percent |
| 30 to 35 |
2 percent |
| 35+ |
1 percent |
The inexperience surcharge, in this case, means the basic rate
for insurance goes up 10 percent for a brand-new driver.
But if that brand-new driver is a teenager, the basic rate gets
much, much steeper.
|
At age
|
Surcharge
|
| 16 |
88 percent |
| 17 |
78 percent |
| 18 |
68 percent |
| 19 |
58 percent |
| 20 |
49 percent |
| 21 |
40 percent |
| 22 |
33 percent |
| 23 |
26 percent |
| 24 |
20 percent |
| 25 |
15 percent |
Premiums for teenagers will reflect both penalties.
Car insurance companies "look at your age and your experience as
a driver separately," says Chris Hackett, director of personal
lines policy for the Property Casualty Insurers Association of
America.
Every insurer's rating schedule will be different, of course,
and most remove age as a rating factor after 25 or so. (See "
The cheapest age for car insurance
.") But every year a teen holds off driving can mean hundreds of
dollars in savings.
That reasoning is supported by data from the U.S. Census Bureau,
which found that in 2009, licensed drivers age 19 and younger
accounted for less than 5 percent of all drivers, but were involved
in 12 percent of all accidents.
What, you mean wait to drive?
An increasing number of teens are forgoing automobiles
altogether, and the number of licensed drivers age 19 and younger
has slipped in recent years. (See "
Why your teen does not want to drive
.")
According to the
Federal Highway Administration
, 44.4 percent of all teens age 19 and younger had a license in
2010, down from 46.3 percent of the same group in 2008.
In comparison, more than 91 percent of people between the ages
of 40 and 44 were licensed drivers both in 2008 and 2010.
Of course, it's tough to get around in many locations without a
car, but in most cities there can be other options. You may be able
to walk or bike to school or work, or if you live in a big city you
can often rely on public transportation to get around.
If you're a big-city teen who can't resist getting a driver's
license, many cities have car-sharing programs available, and
insurance policies for those who drive but don't own a car are
usually inexpensive, says Penny Gusner, consumer analyst for
CarInsurance.com.
If you're a teen in a car-owning household, though, premiums
will skyrocket the moment you get a driver's license. (See "
What young drivers need to know
.")
Good grades and the right driver's education class will help,
Hackett says, but you'll pay a lot in any case.
OK, what if I wait until I'm 40?
One car insurance company quotes a price of $2,374 for a
six-month policy for a 16-year-old girl in Chicago who just got a
car and a license in a neighborhood where public transportation is
readily available.
A just-licensed 40-year-old woman in the same Chicago
neighborhood in the same car was quoted a rate of $1,156 for six
months.
So why do 40-year-olds get all the breaks?
They don't, actually. Even a 40-year-old will probably face a
car insurance surcharge if he hasn't been licensed for three years,
and he won't be eligible for a good driver discount, Gusner says.
So a newly licensed 40-year-old will pay more than one of his peers
whose had a license for decades.
But a newly licensed 40-year-old is likely to take fewer risks
while behind the wheel than a newly minted teen-age driver, Hackett
says.
Gusner agrees. A car insurance company will likely view that
40-year-old as a better, less aggressive driver, and someone who is
much less likely "to be trying to show off for their girlfriend,"
Gusner says.
What do 40-year-olds have that a teen doesn't, besides
wrinkles?
A credit score, for starters. That's one of the elements car
insurance companies in most states consider when they're setting
auto insurance rates. Someone with a good, established credit
record is viewed as less likely to file a claim.
A 40-year-old may arrive with a homeowners policy and an
already-licensed spouse, all the better to get those
multiple-policy bundling discounts.