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How Much is Insurance for a New Driver?

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Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency...

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Reviewed byJoel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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student driver

Insurance Q&A: “How much is insurance for a new driver?”

If you’re new to this country or have a newly licensed teen, you may be wondering how much auto insurance is going to set you back.

The cost of insurance for a new driver can vary widely depending on several individual factors and the type of vehicle to be insured.

A quick review of how car insurance rates are determined may help you understand the basics of how your car insurance premium is calculated.

But whether you’re “new” or “old,” the same factors are taken into account when an insurer decides how much you should pay for coverage.

The Reality Is…

Generally speaking, if you are new to auto insurance, you can expect to pay more for coverage than someone who’s had consistent, uninterrupted auto insurance coverage. In fact, there are even discounts for drivers who have been consistently insured.

Car insurance premiums are based on the person (or persons) driving the car and the car itself. Newbies are usually more of a risk for an insurer because there is no previous driving history to “judge” you on.

Insurers look at your driving history, specifically your MVR and C.L.U.E. report, to determine your rate.

You are automatically considered a higher risk if you don’t have a driving history for the insurer to review…it’s kind of like getting a mortgage with no credit. Your rate will be higher, if you’re approved at all.

Additionally, there is often a surcharge for people with an “unverifiable driving history.” It can vary widely, but may be in the 10-20% range. So all other things being equal, you’ll likely pay more as a new driver.

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What is the Insurer Looking At?

That said; let’s look at the factors that make up the premium you can expect to pay as a new driver. The possible combination of these factors is almost infinite, so we can’t simply give you a number, but we can tell you what the insurer will be looking at.

1. Why are you new? If you’re newly licensed as a teenager, especially a male, you can expect to pay through the nose for a new policy. Teen drivers are notoriously expensive to insure.
Expect a minimum of $100 per month ($1,200) per year. The cost to insure a first time driver who is at least 25 years old is much less expensive, but still more than what it would cost if you had previous coverage.

[How much is car insurance for a 16 year old?]

2. What coverage do you want/need? Are you shopping for liability only auto insurance, or full coverage including comprehensive and collision? As expected, the more coverage you ask for, the more expensive the policy.

[Collision vs. comprehensive coverage]

3. What type of car are you insuring? Never drove before, but just won the lottery? The cost to insure a 1990 Honda Civic will cost substantially less than coverage for a 2012 Ford Mustang GT convertible.

Tip: You do not need to purchase full coverage unless you have a loan or lease your new ride. Physical damage coverage is not mandatory by law, but you lender or leasing agency will certainly require this coverage. Remember, you don’t OWN the car until it’s paid off!

4. How’s your credit? Nowadays, most insurers rely on your insurance score to determine how much to charge you for insurance. If you’re a new driver with a perfect credit history your rate can be as much as 35% less than a new driver with a less-than-perfect credit history.

[Credit scores and car insurance rates]

For example, an 800 credit score “new driver” will likely pay less than a 500 credit score seasoned driver with a speeding ticket, but not if the 800 credit score driver is a 19 year old male.

So be sure to stay on top of your credit. It’s one of the few things you can control, even if you’ve never driven a car in your life.

New Drivers Need to Shop Around Even More!

As a new driver, it’d be in your best interest to shop around extensively. There are certainly companies out there that have more of a risk appetite for new drivers.

Be sure to gather insurance quotes online and contact a few local independent insurance agents to shop your premium.

You may also want to stay away from insurance companies that spend hundreds of millions of dollars advertising their products on TV.

Ultimately, your premium dollars are spent on attracting new clients rather than providing less expensive coverage to existing clients.

(photo: cjc4454)

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