Does Car Insurance Go Down Over Time?

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One of the clear signs that your parents are ready for you to make it on your own is when you get to start paying for your own auto insurance. The bad news for young people is that teen drivers are the most expensive to insure because of high accident rates. The good news is that over time, with safe driving and responsible living, you can potentially lower your premiums or offset rising rates.

Inflation Effect

Over the course of years, inflation has some counter effects to the notion of lowering premiums. Even if you do the right things as a driver, rising costs to insurers of providing coverage can lead to higher rates. If providers experience especially high payouts in a period of time, for instance, all customers fitting the "high-risk" profile may see higher premiums. Plus, the natural rise in cost of living and doing business causes gradual increases.

Safe Driving

One of the best ways to get the lowest rates as time goes on is to drive safely. As you move from teen years to young adulthood, a clean driving record contributes mightily to stable or even lower premiums. As a new driver, the insurer has no history to rely on, so your premiums are based mainly on risk assessments of drivers that fit your demographic profile on factors such as age, gender and location.

Age and Credit

Two other factors that work for you in reducing insurance over time are your increasing age and good credit. A November 2013 CarsDirect article noted that 25 is a key age at which drivers get out of the "riskiest" age group for auto insurers of 16 to 24. If you have driven responsibly, you should see a drop from rates when you turn 25. If you get loans and credit cards and build a responsible payment history, your rates may drop as well. Many insurers look to credit reports as a sign of your overall responsibility when assessing rates.

Driver and Vehicle Implications

The decisions you make with cars and insurance also greatly affect rates. Many parents set teen drivers up with less-valuable cars and liability-only policies to keep premiums reasonable. If you graduate, get a good job and buy an expensive car, you likely want to pay for full coverage. Naturally, a full coverage policy is much more expensive. Additionally, the safety history and features of your vehicle affect rates. New cars often are more expensive to cover than old ones. However, an old vehicle without adequate safety features can still cost a lot. Higher deductibles can also reduce monthly premiums.