Car insurance for new drivers

If you have a young driver in your household, you may be wondering at what point they’ll need insurance coverage.

In most provinces, young drivers, who have completed the first stage of the licensing process, are covered free of charge under their parents’ policies, as long as they are listed as a driver. However, requirements do vary by province, so its best to call your Financial Advisor to confirm.

How to save more
Most insurance companies offer discounts for young drivers who pass an approved driver education program, after they are fully licensed. New drivers can also earn discounts as long as they don’t have any at-fault accidents or chargeable convictions during their licensing process.

You may save money on premiums by encouraging your child to gain driving experience on your car before they purchase their own. Other ways to save include increasing deductibles and removing unnecessary coverage, such as collision coverage, on older vehicles.
The auto industry should join forces with the housing sector to investigate what happens when young people can no longer afford what they have to sell.

For different reasons, both of these pillars of our economy are looking at serious affordability problems. Demand for houses is at risk because prices have surged dramatically at a time when young adults are struggling to be financially independent of their parents. Car prices have been rising less than the inflation rate in recent years, but the actual cost of ownership for young people has reached levels that don’t seem to make sense.

It’s not the cost of gas in play here, or maintenance bills. It’s car insurance. Depending on where you live, what you drive and which insurer you use as a young adult, insurance ranges from exorbitant to utterly unaffordable.

Let’s use the example of a 22-year-old male in Calgary buying a 2009 Toyota Corolla. According to the car insurance quotes offered on the new Rates.ca website, annual costs range from $2,758 to $4,525. A woman of the same age would pay $2,494 to $3,560.

Switch to Toronto and the costs range from $3,751 to $7,280 for a male and $3,275 to $5,198 for a female. What, you thought young women paid much lower premiums? «I’ve heard they’re catching up,» said Pete Karageorgos, director of consumer and industry relations at the Ontario division of the Insurance Bureau of Canada (IBC).

What they’re catching up to is pricing where young adults could conceivably pay as much in car insurance as they do in income tax. What’s next? Car Insurance Freedom Day?

Mr. Karageorgos had some figures at the ready to explain why young adults pay such high premiums. Drivers aged 20 to 24 accounted for 8.3 per cent of licensed drivers in Ontario as of 2011, 11.5 per cent of injuries related to car accidents and 16 per cent of fatalities. «Insurers try and match the price to the risk,» he said. «Given that young drivers have a disproportionate number of crashes and injuries for their relative size of population, they’re charged more.»

This pricing is logical, but it raises questions about future car ownership trends. Canadians have been buying new cars and trucks at record levels, so the auto industry is in great shape for now. But as it looks forward, auto makers have to be wondering how many cars they will sell to young adults with limited means to buy vehicles and a preference for an urban lifestyle in which cars aren’t necessities. High car insurance premiums just add to the argument against car ownership.

Young adults who do choose to own a car have a few ways to hammer down their premiums. The smart move is to buy used and stay away from car brands and models that insurers have pegged as being especially likely to be stolen. A Honda Civic model and several types of pickup trucks and SUVs are on the IBC’s latest list of most stolen vehicles.

Here are a few other cost-saving opportunities for young adult drivers from Daniel Shain, director of product at VerticalScope Inc., parent company of Rates.ca:

The driver training discount: Completing an approved driving training course is the most basic way to cut your premium.
The good student discount: Save money if you maintain high standards in high school or university (one insurer requires an average B or higher, or a grade point average of 3.0 or higher). If you’re keeping good grades it’s assumed you’re similarly conscientious about obeying the rules of the road.
The multivehicle discount: Young adults who live at home should see whether they can bundle their vehicle with their parents’ cars to lower the overall household premium.
The good driving discount: A clean driving record over three years or more may qualify you for lower premiums.
The best car insurance bargain for young adults is to be an occasional driver on a parent’s vehicle, Mr. Shain said. The cost for this coverage should be less than $1,000 per year, and there’s a side benefit that will help in the future. When young adults buy a car, they can save on insurance premiums if they have a history of being insured. Being an occasional driver on a parent’s car starts the process of building this history.
Reduce The Cost of Insurance For New Drivers
Suggestions to Reduce the Cost of Insurance for Newly licensed and Young Driver Insurance

Register in driver training courses. There are many companies and organizations that offer this valuable program. The in-car driving and classroom training can have up to 25% reduction on your insurance rates. Plus, as a newly licensed driver, you will take what you learned on the road when you safely drive your vehicle.

The type and year of vehicle that you drive will affect your premium. Simply put, car insurance is less expensive for older vehicles. Colllision coverage will cost less and you may choose to delete this coverage on your vehicle.

You may also want to use our online quoting system Armour Insurance Quote to research insurance costs for different models. Fill in the form for your vehicle and you can see the range of quotes for vehicles for your budget consideration.

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