Car insurance for teens

By Simon Bordoli

I recently obtained my driver’s license and am now allowed to drive by myself.  While the independence this affords me is great, there is a serious drawback that comes with being a teen driver: car insurance.  Through my process of getting my license and driving by myself, I have learned a lot about how car insurance for teen drivers works.  Here are 3 things that stood out to me:

1. Car insurance is mandatory to drive in almost every state within the United States.  For teen drivers in California, the average premium per month is $330.  This totals to almost $4000 across the whole year.  In the United States, the lowest average premium is $176/month in Indiana, and the highest is $638/month in Colorado.  This is something to consider, because even though obtaining a license is relatively inexpensive, the cost of car insurance is prohibitive for many families.

2. Car insurance is more expensive for teens than adult drivers.  Insurance costs peak at $6541 for 18-year-old men, and decrease to $2500 by the time they are 25.  The increased rates for teens drive stems from the higher risk of accidents that occur from teen drivers.  A study in 2021 showed that “the fatal crash rate per mile driven for 16-19 year-olds is nearly 3 times the rate for drivers ages 20 and over. Risk is highest at ages 16-17”.  In order to protect themselves from the elevated risk associated with teen drivers, insurance companies need to charge higher premiums.

3. Car insurance is more expensive for male drivers than female drivers.  For example the aforementioned rate for 18-year-old men is $862 more than the $5679 rate for women of the same age.  According to the Insurance Institute for Highway Safety (IIHS), “men typically drive more miles than women and are more likely to practice risky driving behaviors like speeding, driving while under the influence of alcohol, and not wearing safety belts”.  This means that they are more likely to be involved in a car accident and make an insurance claim.  The higher premiums for men protect companies against these claims. 

Sources:

1.  https://smartfinancial.com/auto-insurance/driver-age/17-year-old

2.  https://www.bankrate.com/insurance/car/auto-insurance-rates-by-age/#age

3.  https://www.iihs.org/topics/fatality-statistics/detail/teenagers

4.  https://www.bankrate.com/insurance/car/auto-insurance-rates-by-age/#age

5.  https://www.forbes.com/advisor/car-insurance/rates-age-and-gender/