Published: April 2015
Q: Is it true that turning 25 affects my auto insurance?
A: Assuming you have a good driving record, when you turn 25 your car insurance premiums will typically decrease, says Joe Schneider, a Chicago Allstate insurance agent. From the perspective of insurance companies, you are considered an experienced driver and are less likely to have an accident once you turn 25, which generally results in lower insurance premiums. Schneider also notes that it also makes renting a car easier, as rental companies typically have fewer restrictions for drivers who are 25 and older.
You do not need to have your own policy if you still live in your parents’ home. “There are no known age restrictions on remaining on your parents’ policy as long as you live in the same home,” Schneider says. In fact, it could be beneficial to stay on your parents’ policy, as they may have lower rates than young, single drivers. If you own your own car, though, most insurance companies will require you to have your own auto insurance.
To insure a car, you must have an insurable interest in it. So if you (the adult child, to the insurer) own your car (hold title, have paid for it yourself), you will need an insurance policy in your name on that car. The parent can be listed as an additional interested party, which would protect their liability if you cause an accident.
“Regardless of age, you need to have the proper liability and property damage limits. If you get into an accident without the right coverage, the few dollars you saved on your policy will not matter,” Schneider says.
Additionally, comprehensive and collision coverage are typically required if you have a car loan. Schneider notes that it is also important to look at your liability limits. “The cheapest coverage may cost you a lot in the long run if you are found liable or negligent in an accident.”
When purchasing a new car, Schneider suggests looking into a new car replacement program with your insurer. If the car is totaled within its first few model years (this may vary between insurers), a replacement program typically allows you to get another new car instead of a check for the value of your current vehicle.
When looking to save a little money, Schneider recommends asking your agent about multi-policy discounts. Many insurance companies offer discounts if you have several lines of insurance with them, so it may help to have both your renters and auto insurance with the same company, for example. Another upside to this, according to Schneider, is that having a renters (or homeowners) policy with the same insurer as your auto policy means that your personal belongings in the car would likely be covered under your renters policy should they be stolen while in the vehicle.
It’s always a good idea to check with your agent for any other discounts you may be eligible to receive. Schneider suggests asking if your insurer offers discounts for using a telematics device or smart phone app that monitors your driving activity. More companies are offering these technologies now and may reward good drivers with discounts on their premiums.
While turning 25 can certainly have its benefits, Schneider says he would not necessarily treat a younger driver any differently than someone who is older. The most important thing is having the right coverage so that you know you and your vehicle are properly protected