Car Insurance for Young People: Why it Costs More
Did you know that young people often pay higher premiums for their car insurance?
If you’ve been in the position of trying to find affordable car insurance or have seen your premiums change over the years, you might be asking yourself why being a younger driver often comes with a higher price tag.
For decades, younger and more inexperienced drivers throughout Australia have been paying significantly larger premiums on their motor insurance than everyone else on the road.
Let’s break down why Gen Z is paying more for car insurance than the generation preceding them.
The younger you are, the more likely you are to make a claim
A 2021 review by Compare the Market revealed that insurance companies are faced with more claims from people under 25 than any other age group. The data indicates that young drivers are more inexperienced, take more risks, and are more easily distracted than older drivers on the road.
In 2019, Victoria Police found that young Australians are four times more likely to be involved in a serious or fatal crash than a more experienced driver.
Premiums for this group are more expensive as a result. If you’re statistically more likely to get into an accident, insurance companies balance the risk of insuring you with a higher premium.
Less time on the road = less experience
As a driver spends more time on the road, they don’t just clock up more kilometres on the odometer. They get valuable experience navigating different road conditions and a better understanding of how to handle their car in different situations.
With less time spent behind the wheel, it makes sense that young drivers are less experienced. A learner driver in Victoria must drive 120 hours before they’re eligible to get their probationary driver’s licence. That’s the equivalent of fifteen full days of driving for 8 hours. Yep, just 15 days.
As young drivers continue to build years of experience, insurers will take this into account and reduce their premiums over time.
Young drivers tend to take more risks
According to the Australian Institute of Family Studies (AIFS), 80% of p-plater drivers had performed some form of ‘risky driving’ in their ten drives prior to the survey. Risky driving includes speeding more than 10km/h over the speed limit and driving while tired. According to the Transport Accident Commission (TAC), 20% of fatal road accidents occur due to driver fatigue.
A 2017 study by Scott-Parker and Oviedo-Trespalacios found that risky driving means younger drivers are more likely to be involved in an accident, resulting in more claim applications with their insurers.
The good news is, it’s not forever
As frustrating as it can be for younger drivers having to pay expensive premiums for their protection, responsible driving as a young adult can work in their favour. Drivers who historically have had more claims and crashes will often pay a higher premium than drivers without a negative history.
Age isn’t the only factor in calculating the cost of car insurance. Car insurance premiums are also dependent on the make and model of your vehicle, where the vehicle is kept and where in Australia you live.
Is your car protected?
Whether you’re on your daily commute to university, heading off for a road trip, or on your way to work, eric can be there to protect you from the unpredictable moments in between. eric’s Comprehensive Car Insurance can help pay for your repairs or, in extreme cases, replace your car. Simple as that.
Visit our website to find out more about eric’s Comprehensive Car Insurance.
For more tips, tricks, and education for your motoring journey, visit https://ericinsurance.com.au/
This article may contain general financial product advice that does not take into account your personal financial circumstance. Make sure you read the Product Disclosure Statement (PDS) before making any decisions about your insurance.