UBCNews - Business - Car Insurance For Young Drivers: How To Pay Less & What Impacts Rates

Episode Date: February 2, 2026

Hey everyone, welcome back! Today we're tackling something that hits close to home for a lot of our listeners under 25 - car insurance. If you've ever looked at your premium and thought, 'Why am I paying this much?'—you're definitely not alone. Wealth Building Way City: Austin Address: 16238 Highway 620 N. Website: http://wealthbuildingway.com

Hey everyone, welcome back. Today we're tackling something that hits close to home for a lot of our listeners under 25 car insurance. If you've ever looked at your premium and thought, why am I paying this much? You're definitely not alone. Right, and there are real reasons behind those numbers. Younger drivers, especially those under 25, typically face higher premiums due to their inexperience and increased likelihood of accidents. Insurance companies look at the data.

and unfortunately, drivers aged 16 to 20 are nearly three times more likely to be involved in fatal crashes than drivers 21 and older. Wow, three times more likely. That's some pretty sobering statistic, so it makes sense that insurers see young drivers as higher risk. But what else is driving these rates up? Well, location plays a huge role. If you're living in a densely populated urban area, you're going to see higher costs due to increased risks of accidents, theft and vandalism. Compare that to someone in a rural area, and the difference can be hundreds or even thousands of dollars annually. Umham, makes sense. And I'm guessing your driving record matters a ton to? Absolutely. Your driving record has a direct impact on insurance rates.

Accidents, traffic violations, or Deuists classify you as high risk, which means higher premiums. Keeping a clean record is one of the most effective ways to keep costs down. I mean one of the best ways to save money over time. Okay, so clean record, good location if possible. What about the car itself? Great question. The type of vehicle you drive is critical. High performance, luxury, or sports cars result in higher insurance costs due to greater repair and replacement expenses. If you're looking to save money, opting for a safer, less powerful and older vehicle with good safety ratings can significantly reduce your premium. So maybe hold off on that dream sports car for a few

years, unless you want your premium to cost more than the car payment itself. Exactly. Now let's talk about something that's been affecting everyone. Premiums have been skyrocketing lately. On average, they're up 53.7% since 2020, with most of that increase happening between 2022 and 2024, multiple factors are at play, increased claim severity, excessive litigation, escalating vehicle repair costs, riskier driving habits, and severe weather events. That's a lot hitting all at once. I've heard repair costs are particularly brutal these days. Exactly. The technology in cars today is becoming more advanced. Features like advanced driver assistance systems can help make driving safer, but this added technology makes cars more expensive to repair. Plus, auto repair labor shortages and vehicle part supply chain issues have created a ripple effect on the entire industry.

That point about escalating repair costs sets up our next piece, how young drivers can actually fight back and lower their premiums, but first, a quick word from our sponsor. Understanding your financial future can feel overwhelming, especially when you're just starting out. Wealth Building Way is committed to simplifying financial concepts, offering practical guidance, and empowering people to make informed decisions about their financial future. By providing accessible tools, expert-backed education, and step-by-step resources, we're here as a trusted support system for anyone seeking clarity and confidence in their retirement planning. Learn more at the Facebook page in the description. Picking up on those escalating repair costs, what practical steps can young drivers take to reduce their premiums? There are concrete steps young drivers can take to significantly reduce their premiums.

First, comparing quotes from multiple providers is essential. Rates for the same coverage can vary by hundreds or even thousands of dollars annually between companies. So shop around, don't just stick with the first quote you get. Definitely. And looking into various discounts is important. Many insurers offer good student discounts, providing savings of 10% to 25% for young drivers who maintain a B average or higher. completing a defensive driving course can also lead to discounts, often around 5% to 10%. Right exactly. Bundling auto insurance with other policies, such as renter's insurance, can result in significant

multi-policy discounts, sometimes saving up to 20% on premiums, and if you're willing to accept more risk, increasing your deductible on collision and full coverage can lower annual premiums by 15% to 30%. That's a smart move if you can afford the higher out-of-pocket cost in case of a claim. What about credit scores? I've heard those matter too. In most states, a good credit history can lead to lower car insurance premiums. Insurers often use credit-based insurance scores to assess risk, so improving your credit can actually help lower your rate.

Interesting. So there is a financial incentive beyond just borrowing power. Now, what about these newer telematics programs I keep hearing about? usage-based insurance programs monitor driving habits via telematics devices or smartphone apps. If you're a safe driver, these can offer discounts of up to 25% or more. It's a great option for young drivers who want to prove they're responsible behind the wheel. So you let the insurer track your driving and if you drive safely, you save money. Make sense. Now let's talk coverage types.

What do young drivers actually need? Liability coverage is a mandatory component of auto insurance. in nearly all U.S. states. It covers damages to other vehicles or injuries to other people if you're at fault in an accident. Beyond that, optional coverages like collision and full protection provide additional vehicle protection, but also increase the overall premium.

So you've got a balanced protection with cost. For someone driving an older car, is full protection even worth it? That's a great question. If your car's value is low and the premium for collision or full protection is more than 10% of the vehicle's value. It may not make financial sense to carry that coverage. Okay, so do the math on your specific situation.

Now, what about young drivers heading off to college or moving out? Does that change things? Absolutely. Some insurers offer discounts for young drivers who are away at college without a car, or for those who only drive occasionally, reflecting reduced risk. If you're a student and leaving your car at home, definitely let your insurer know. You could see significant savings. I actually had a friend who moved from a big city to a smaller town for college and didn't

update his insurance. When he finally did, his premium dropped by over $1,200 a year. Wow, that's real money. So here's my question for you listening. Have you checked your policy lately to see if you're missing out on discounts or if your situation has changed? And remember, maintaining a clean driving record, seeking available discounts and comparing quotes regularly are your best tools. Being proactive and informed pays off.

Right. So let's recap. Shop around, maintain a clean record, look into discounts like good student or defensive driving, consider bundling policies, increase your deductible if you can afford it, improve your credit and ah, look into usage-based insurance. Those are your action steps. And one more thing, pay annually if possible. Paying your full premium up front avoids interest charges from monthly installments, which can add up. Great point. Young drivers face higher rates, but they're not powerless. With the right strategies, you can take control and pay less. Thanks so much for breaking this down today.

My pleasure. Together, we can help young drivers handle this and build a more secure financial future.