Your 25th birthday is a major milestone in life. Not only have you been alive for a quarter century, you’ve also reached an age where you can legally rent a car without paying a surcharge.
Most people don’t put as much focus on their 25th birthday as they do their 21st, but there’s a lot to celebrate when your birthday comes.
You don’t quite pay as much for insurance in your 20s as you did when you were in your teens, but your rates are probably still higher than you’d like them to be.
As time passes and you build a positive insurance reputation, you’ll see future renewals steadily go down. If you’re about to reach a new milestone at the age of 25, here’s what you need to know about how your car insurance will be impacted by your birthday.
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Keeping Your Insurance Under Your Parents’ Policy
Auto insurance doesn’t work like employer-sponsored medical insurance. When you’re buying medical insurance, you have the right to keep your medical insurance under your parents’ policy as long as you’re 25 or younger and you live with your parents.
After you reach 26, you have to buy individual medical insurance or qualify for a public program.
Auto insurance companies set their own rules when it comes to who can and can’t be insured under their parents’ insurance. Luckily for you, the rules aren’t as strict and there’s not a specific age cutoff that’s universal to all insurers.
You could be 18, 21, or even 25 and still be insured under your parents’ insurance as long as you’re living in the household. Some carriers might also require one of your parents to be on the registration as well.
Is it best to stay on your parents’ insurance when you’re 25?
Not everyone is taking the leap to become independent as soon as they turn 18 or 21. If your car is still comfortably insured with your parents, you don’t have to rush to branch off on your own just because you’ve celebrated another birthday.
As long as you’re still in the same house as your mom and dad, it’s best to keep the coverage combined. Being insured with your parents will save you money in more ways than one.
First off, you’ll be eligible for a multi-car discount and possibly a multi-line discount. You’ll also get the loyalty rewards that your parents receive. That means you can have higher limits of coverage for less money.
Age is a Common Rating Factor
Insurance companies all have a list of different factors that they care about. These factors are believed to have an influence on loss exposure while the car is being driven or parked.
It doesn’t matter if you’re insured on your parents’ plan or if you buy your own plan, a common rating factor that all carriers are going to look at is age.
Age is more than a number to your insurance agent. It’s a number that can help the agent set you into a rating class. Anyone who buys insurance when they are young is going to be a high-risk driver just because they are in their teens or early 20s.
Carriers charge the highest premiums for drivers under 19. As long as the state doesn’t deem age to be a discriminatory practice, how long you’ve been alive will affect your rate at each renewal.
How does turning 25 change things?
If you’re in a state where insurance officials do consider age a fair rating factor, you’ll see your rates go down after you celebrate your birthday. The biggest decline in rates happens when a driver turns 25.
The statistics show that both male and female drivers are statistically more responsible at 25.
If you’re in a state like California, where age can’t be considered to set rates, you’re not in the clear. Carriers don’t specifically consider your date of birth but they will look at another date. Instead of looking at age, the carrier looks at your driving experience.
When you have nine years of driving experience, you don’t have to pay a high-risk rate at your following renewal.
Driving experience is usually defined as how long you’ve been licensed by a state in the U.S.
Sometimes, credit for licensing experience in other states will be considered if you have a translated motor vehicle abstract. Make sure you have all of your old license numbers if you’ve moved around so that you get the credit you’re deserved.
With Experience Comes Cost-Saving Discounts
Discounts are what will ultimately save you money at the end of the day. You need to get as many discounts as you can when you’re building a policy but you won’t qualify for the biggest savings until you have driving experience and a proven track record.
Here are a few discounts you’ll be able to qualify for:
- Good Driver Discount/ Safe Driver – offered to drivers with three years of experience who have no more than one ticket or accident
- Accident-Free – offered to drivers with three to five years of experience who have no chargeable claims
- Good Student Discount – drivers who are over 25 will no longer be eligible for discounts for good grades
If you want to shop around for coverage, it’s best to wait until your birthday.
When you’re officially 25, you will be eligible for a new rate based on your age and your experience. You won’t save money on premiums by taking the first quote you’re given.
It’s better to shop around online by getting numerous quotes and then you’ll be prepared to buy car insurance. Enter your zip code here to find the lowest rate for the coverage you need.