“`html

Understanding Auto Insurance Costs and How to Lower Them

Auto insurance premiums often cost more for drivers under the age of 25. However, age is just one of many factors insurance companies use to calculate your rate, and there’s no guarantee you’ll receive a premium reduction on your 25th birthday. Here’s what you need to know.

Does Auto Insurance Go Down at 25?

On average, the premium for a new auto insurance policy is cheaper for a 25-year-old than for a 24-year-old. For instance, at Progressive, rates on new policies drop by a significant 9%. This is because drivers under the age of 25 are statistically more likely to cause an accident and file an insurance claim. According to 2021 data analyzed by the Insurance Information Institute, drivers ages 16 to 20 are the most likely of any age group to die in a car crash, followed by drivers ages 21 to 24. Insurance companies mitigate this risk by charging higher premiums.

However, turning 25 won’t necessarily earn you an immediate discount in your monthly premiums. Insurance providers consider several factors when determining your rate, and you may need to reach out to your carrier before your policy renews or switch to a different insurer to capture the savings.

Why Your Auto Insurance May Still Be Expensive at 25

Auto insurance premiums reflect various risk factors. When you apply for a policy, providers review these factors to determine how likely you are to file a claim and require a payout. Age is one of those factors, and Progressive pricing shows that after you turn 19, rates consistently drop over time until you reach age 75, when they start to creep up again. But if you don’t see a drop in your premiums when you turn 25, one or more of the following factors may be to blame:

• Marital status: Married policyholders typically pay 5% to 15% less on their premiums than single people. If you’ve recently gotten divorced, you can expect to pay roughly $50 more for a six-month coverage period.
• Where you live: Drivers in urban areas tend to pay more than suburban and rural drivers due to higher rates of accidents, theft, and vandalism. If you’ve recently moved to a bigger city, that could negatively impact your rate.
• Vehicle type: Insurance companies rate different car models based on factors like their likelihood of theft, safety features, and repair costs. If you’ve recently switched vehicles, your rate could go up or stay the same.
• Your driving record: If you’ve recently been in an accident or were cited for a serious traffic violation, insurers will view you as more likely to file a claim, resulting in potentially higher premiums.
• Your annual mileage: The more you drive, the more likely you are to get in an accident. If you’ve recently started putting in more miles, it could negatively impact your rate.
• Your credit history: Most states allow auto insurance companies to use your credit history to help determine your rates. However, the practice is banned or restricted in several states—including California, Hawaii, and Massachusetts. While states typically don’t allow insurers to use your credit history as the sole basis for hiking your rates, it can be used in conjunction with other risk factors.
• Coverage level: The types of coverage you choose for your policy and the amount will affect your rate. If you’ve recently increased your coverage or your deductible, you’re likely paying more, not less.

5 Ways to Lower Auto Insurance Costs

While you can’t control all of the factors that go into your car insurance rate—your date of birth, for instance—there are some that you can control. Here are some ways you can potentially lower your car insurance costs:

• Shop around for a better rate: Rate shop and get quotes online from a handful of insurance companies. Remember, each one will weigh various factors differently, and some offer discounts that others don’t. It won’t guarantee a lower rate, but it could help.
• Adjust coverage and deductibles: Some car insurance companies offer optional coverage that’s nice to have, but it may not be worth the cost. Look for extra coverage that you don’t truly need and could stand to cut. Also, if you have an emergency fund you can use to cover the extra out-of-pocket costs, consider increasing the deductible on your collision and comprehensive coverage policies.
• Bundle your auto insurance: Most insurers offer discounts to customers who purchase multiple policies. You may be able to save on your car insurance by bundling it with renters insurance, homeowners insurance, life insurance, motorcycle insurance, or other policy types.
• Take a defensive driving course: Some insurance companies offer a discount if you attend a defensive driving course, either online or in person. Check with your insurer to see if it offers this option.
• Improve your credit score: Insurance companies don’t use your FICO® Score like lenders do, but they may calculate a credit-based insurance score based on your credit profile. Check your credit score and credit report to get an idea of your overall credit health. If you find areas that you can address, take action to improve your credit, which can help lower your car insurance rate.

Take your time when choosing a policy and determining the right types of coverage. Again, you’ll want to try to find a balance between what you could afford to pay if you cause an accident and your current budget for the premium.

Maintain Good Credit to Keep Premiums Low

Since your credit can be a factor in your insurance premiums, improving your credit may help you save. Experian’s free credit monitoring service can help by giving you free access to your Experian credit report and FICO® Score powered by Experian data. You’ll also get real-time alerts when changes are made to your credit report, such as new accounts and inquiries. Monitoring your credit closely will give you the information you need to build and maintain a good credit score.

For any mortgage-related needs, O1ne Mortgage is here to help. Call us at 213-732-3074 to speak with our experts and find the best solutions for you.

“`