Jessica Sautter has a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Written by Jessica Sautter
Content Writer Jessica Sautter

Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around auto insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Reviewed by Natasha McLachlan
Content Writer Natasha McLachlan

UPDATED: Oct 1, 2020

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You may have noticed the difference in auto insurance rates when you turn 25 as that begins decades of far lower premiums compared to what you have paid before. While it seems that turning 25 is arbitrary in terms of why rates suddenly drop, there are good reasons as to why it happens.


Insurance companies base their premiums on statistics provided to them by national research and your own driving record. This is because insurance companies are covering the risk you present in terms of becoming involved in an accident. There are the statistics that are based on your driving record, such as the number of accidents and traffic citations that you have received.

However, there are also national statistics that assess the risk you present based on research which reveals the likelihood of you having an accident based on your age, gender, credit ratings, and other factors.

For factors like age, those who have yet to reach 25 are far more likely (3 times more) to be involved in an accident compared to those who have turned 25 years old.

There are different reasons why people under the age of 25 are more likely to be in an accident, but it is mostly due to the driving experience. The more experienced behind the wheel you are, the less likely that you will be in an accident.

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Factors Involved in Auto Insurance Rates

So, now that you know why your age is important in determining auto insurance rates, the next step is how it affects you when purchasing your first vehicle, staying on your parent’s policy, and so forth.

Your First Car: Buying your first vehicle can be a dramatic experience, but it should not make your insurance rates go any higher compared to purchasing your second, third, or fourth vehicle. This is because your insurance rates are not based on how new the vehicle is, although the type might play a role. Instead, it will be based on your age, gender, driving record, and other factors that go into calculating the rates you pay.

Parent’s Policy: One common tactic that many people under 25 will use is to stay on their parent’s policy. Because the parent’s name is on the policy, it helps to lower the rate considerably. This means that the parent is paying for the insurance at least according to the company, but you can work out an arrangement if you desire.

You’ll find that almost all insurance companies offer incentives to help lower your rates, even if you are not on your parent’s auto insurance policy. Some of the ways that you can reduce your premiums include, but are not limited to the following;

  • Raising the Deductible
  • Taking a Recognized Driver’s Safety Course
  • Bundling Auto with Home or Other Insurance
  • Going with State Minimum Requirement for Insurance
  • Driving a Safer Vehicle

Your insurance rates for driving a high-performance sports car will be far higher compared to driving a standard car or truck. You can use these tips to help you save money on your insurance rates which in turn puts more money in your pocket.