Car insurance for young people

Being able to drive is one of the biggest steps towards their independence – a very expensive step.

Beyond the cost of a new or used vehicle, gas and maintenance, there is the cost of insurance. If you’re a teenage driver, you have probably already discovered that young people face the highest vehicle insurance premiums of all drivers on the road.

The reason for this is clear given the sobering statistics. The Alberta Ministry of Transportation says that between 2008 and 2013, more than 200 young drivers aged 14 to 24 were killed and 13,116 were injured in crashes.

The unfortunate reality is that young drivers stand a very strong chance of being in a car accident. In fact, one in five drivers will have an accident in the first year of driving.

For young drivers, high insurance rates are simply the cost of having the privilege to drive. But there are a few things that you can consider to reduce them – at least a little.

Take a defensive driving course or driver’s ed. Not only will your insurance rates drop, but you’ll also be a much safer and smarter driver on the road.
If you’re a college or university student or graduate under 25 years of age, you can get additional savings on your insurance
Shop around and compare to get the best insurance rates
Young drivers can be on their parents’ car insurance policy at significantly reduced rates. However, if the young driver is in an accident, chances are the premiums will increase on the parents’ policy.
Drive an older vehicle – insurance is less expensive on older models.
Don’t modify your car. Modifying your car in any way that affects the engine, bodywork or wheels may do two things: boost your insurance rates, or affect the performance of your car in such a way that it may void your insurance policy in the event of an accident.
Add security features such as alarms or an anti-theft device to reduce the risk of theft.
Start working on building a great driver history. Good drivers with no claims over a certain number of years are rewarded with lower premiums.
Getting the keys is an exciting moment in every young driver’s life. It’s also an opportunity to take a giant step towards adulthood. Careful consideration around driving choices and behaviour on the road will help to lower your premiums, and take you that much farther in life.
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.

Finally, comparing rates at various companies is crucial for young drivers. «Rates vary quite a lot,» Mr. Shain said. «We’re talking thousands of dollars. Some insurers like to insure young folks, and others don’t.»