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UPDATED: Aug 31, 2019
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Click below to jump to different factors that impact whether your rates will go down after the first year:
Car insurance can be a major expense. If you are newly licensed and are planning to buy a car in the near future, you can expect to pay higher rates than those who have years of experience operating a motor vehicle.
While the true costs of vehicle ownership can add up, some of the expenses will go down over time. Before you elect to buy a car that carries high insurance costs and that costs an arm and a leg to maintain, it is best to do your homework.
Inexperienced drivers are the most expensive drivers to insurance, even when they have clean driving records.
Drivers who are just discovering how much car insurance costs for the first year are left wondering if their rates will ever go down. New drivers will be happy to hear that rates do drop over time.
Read this guide to car insurance rates, and you can budget for your rates in the years to come.
How are your car insurance rates calculated?
Insurance companies set their own ratings and must have these ratings approved by the state Department of Insurance. Every company varies in size, invests money in different vehicles, and targets a unique demographic of drivers.
Your rates with one company may be much higher than they would with another who is priced to sell the most business to drivers who are inexperienced.
While prices vary from insurer to insurer, each insurance provider uses most of the same factors to personalize rates for applicants. Here are four factors you may have never known had an effect on your premiums:
#1 – Men Vs. Women
Gender will play a major role in how much you will pay for coverage, especially when you are classified as an inexperienced operator. The studies show that over a span of a lifetime, men will end up paying about $15,000 more to insure vehicles that they own.
This is because accident statistics, studies, and motor vehicle reports show that males get into more accidents and violate more driving laws.
The risk gap between men and women is widest between 16 and 25 and will begin to narrow. In fact, men who are over 55 may statistically pay less than women, but this depends on many other factors.
Some of the reasons why men pay more include:
- Men statistically drive more aggressively.
- Young male drivers are more impulsive.
- Men drive more miles than women.
- Men have longer commutes and drive more often than women.
Luckily, rates will begin to go down when men and women alike show that they make responsible decisions behind-the-wheel and the gap will narrow.
Using quotes we compiled from each state and three major insurance providers, you can see that for 25-year-old with identical profiles, except gender, the gender that pays the higher rate goes back and forth between each state. You can read all the data here.
|State||Male Monthly Premium||Female Monthly Premium|
|District of Columbia||$139.40||$149.19|
#2 – Years of Driving Experience Vs. Age
Another factor that can really impact the amount of money that you pay for insurance is your driving experience. Since you are newly licensed, you can expect your rates to be high at first. This is because:
- You have not yet experienced what it means to be a defensive driver.
- You do not have a history of driving and the insurer has no reference to determine what rates are appropriate.
While age can go with experience, in some states your age cannot even be considered. Instead, the company will use strictly how many years you have been driving to assign you to a rating class.
You should always expect the first year of a new car insurance policy to be the most expensive.
Some companies may lower a policy holder’s rate after their first term, but other companies will not assign lower premiums until the customer has at least three years of blemish-free experience.
Typically, rates will drop as people get experience under their belt and other factors start to drive the rates down as well. If you have an accident claim or a violation, rates will rise instead of fall.
#3 – Vehicle Type
Vehicle type can really raise your rates the first year you buy coverage. As a driver who has not really been exposed to all of the elements on the road, it is not in your best interest to buy a luxury vehicle, a sports vehicle or even a vehicle with a bad safety record.
You should price the cost of insurance before you go car shopping. This research will help you choose a car with a good safety record and low rates.
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#4 – Vehicle Usage
How you use your vehicle also affects insurance pricing. If you drive many miles, your rates will be higher than drivers with minimal usage and those who do not commute to work.
The first year you are insured you will not have much of a driving history to look at. The insurer, however, will run your motor vehicle report and CLUE report to see if you have had an accident or moving violations. If anything shows up, your rates will be higher.
How much will rates go down over time?
There is a long list of reasons why insurance rates go down over time. You may not see a dramatic drop, but most rates will fall a small amount every year you display a clean record.
Keeping your record clean is key. After about three years, you will see a drop because you can receive special Good Driver or Accident-free discounts.
You may also see that each year your loyalty with the insurer will help add to the savings.
Here are some different reasons you can watch your rates drop after the first year:
- Getting married
- Buying a home
- Buying an extra vehicle
- Trading in your vehicle for a safer option
Whether or not your rates go down after the first year is a matter of which company is insuring you. If you do not see your rates go down and you feel like you are paying too much, you may want to consider getting quotes for coverage elsewhere.
Start comparing car insurance quotes by entering your zip code below! After reviewing these, you can decide if the company you chose to insure you as a new driver is best for you.