The Shock, The Horror: Saving on Car Insurance in Your 20’s

girl in carIt was only a handful of years ago that I myself was in my 20’s. As a teen, my first couple of cars were old vehicles that needed only the bare minimum in terms of insurance – liability and nothing more. After my second car was stolen, though (in my early 20’s), I started exploring my options for newer vehicles.

And boy was I surprised. Full coverage car insurance, with liability, comprehensive, and collision coverage was a lot of money. I worked for a car insurance company at the time, too, so I knew how to leverage discounts. I still experienced significant sticker-shock.

The major contributing factor was my age – early 20’s. 

I usually laugh when people say they are “adults” at the age of 18. I tell them they’re only 1/3 adult. At 18 you can smoke (19 in some states); at 21 you can drink and gamble); and at 25 you can rent a car (and probably see your general auto insurance rates go down).

But I digress. So what happens if you’re a 20-something and you really want to buy a new car? How can you save money on that astronomical insurance bill? There are several things to consider.

Don’t Move to a Dangerous Location

Strange advice, eh? Most people don’t realize that insurance companies split states and counties into “territories.” A certain rate is applied to each territory based on location, crime rate, statistics regarding car accidents, and more. It’s a complicated algorithm that people called “actuaries” study and decide upon.

That said, if you’re in your early 20’s, graduating college, or moving out on your own, you need to seriously consider where you’re going to live. Here in NJ, I will pay a significantly lower rate in Cherry Hill than I would if I were to move into the city of Camden (with some of the highest crime rates in the country).

Be Conscientious about Your Choice of Vehicle

Let’s be real here. Sports cars are expensive – both to buy and insure. As a younger driver, you are already paying higher insurance rates simply because you are statistically more likely to have an accident. Add the stigma of a sports car to the mix and you’re going to be looking at thousands per year in insurance premiums for a brand new car. Yes, I said thousands.

When I worked in insurance I would have people call the agency to ask for quotes for new teens. They would become frustrated when I quoted thousands of dollars for the brand new little sports cars they wanted to buy their teens. As a young adult, you may make out slightly better, but my advice is to stick to a moderately rated sedan or SUV. You won’t pay nearly as much.

Consider the Value of Your Car

Maybe you did get a newer car; or a newer used car that required full coverage for financing. Is it still financed? If not, take a look at the blue book value of the car and consider whether or not it is worth continuing with your comprehensive and collision coverage. If your car were totaled, would you get enough money to replace it with a similar car? The older the car, the less likely the answer to that question is going to be “yes.”

At some point, it may be wise to drop the full coverage and carry just liability. You may end up paying out of pocket for minor repairs, but you’re not going to get anything if the car is totaled. Weigh the pros and cons.

Review Your Coverage and Deductibles

Take a look at the coverage on your current policy. Do you have a newer car with comprehensive and collision coverage? If so, you may want to consider raising the deductibles. A standard policy usually has a $500 deductible for each coverage. The higher your deductible, the lower the premium. Many insurance companies will let you choose $500, $1,000, and increments up to $2,500.

Be cautious, though. The first thing to remember is that you will need to be able to pay that deductible if you do damage to your own vehicle. Do you generally have $1,000 or more available for an emergency?

The second thing to consider is your finance agreement or lease. If your car is not paid off, the terms of your finance or lease agreement may dictate the maximum deductible you can carry (in many cases not more than $1,000).

Look for Additional Discounts

The fact that you’re a 20-something driver doesn’t mean you don’t qualify for additional discounts. Some to ask your agent about include:

  • Multi-car and multi-driver discounts (ie. if you are young and married you may want to merge your policies together in order to save);
  • Good driver discounts for your licensed time without accidents or moving violations;
  • Educational discounts are sometimes offered to college students who can prove their maintaining a certain grade point average;
  • Multi-policy discounts are often offered to people who have more than one policy bundled with the same company (auto and homeowners or renters insurance);
  • Safe driver classes can also make a difference, for a certain number of years, if you offer proof you took the class.

You’re young and you’re enjoying life, but being in your 20’s shouldn’t mean you have to pay out the nose for car insurance. Ask your insurance agent to help you find an affordable car insurance quote. An agent will be able to help you compare companies, coverage options, and rates so that you can make the most economical choice.

 

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