Last Updated on
Finding the right car insurance for under 25 year old drivers can be a real challenge. Higher rates, reduced coverage and higher deductibles often present obstacles for younger, less-experienced drivers who pose a higher level of risk according to the insurance company’s actuarial tables. Typically, insurance companies group drivers according to various criteria that include age and driving history; this allows them to categorize policyholders according to the statistical risk they pose.
The actuarial tables used are based on actual statistics of past performance by drivers in each of the groups. Rates are determined by analyzing the probability of payout on the policy and dividing the financial risk so that those who are likely to cost the company more pay more in monthly premiums. The advent of high speed computers has revolutionized the field of actuarial science and, today, insurance companies can quickly determine the appropriate rate for car insurance for under 25 year old drivers, drivers over 65, and everyone who falls in between.
Car insurance for under 25 year old drivers falls into basically the same categories and coverages as that provided for all other age groups, but usually at a higher cost. Liability insurance is a requirement in most states in the U.S., although some states allow the substitution of a security bond or other proof of financial responsibility. Liability insurance covers only damages to other individuals and provides no protection for the policyholder’s vehicle; in some cases, it is combined with uninsured driver coverage to protect the policyholder against damages caused by drivers who do not carry the legally-required level of liability insurance or who have no insurance at all.
Collision coverage is not legally required, but when considering car insurance for under 25 year olds, it may be a wise choice. Essentially, collision insurance covers damage to the vehicle if it is involved in an accident, regardless of where the fault lies. This can allow younger drivers who depend on their vehicles for their livelihood to protect their transportation investment. Collision insurance is often bundled with comprehensive insurance, which covers most other forms of loss and damage to the vehicle other than accidental collision. If the vehicle to be insured is financed, the lending institution may require that the driver maintain collision and comprehensive insurance on the vehicle in order to protect its monetary investment. For vehicles that are owned free and clear by the insured party, however, the choice of whether to pay for this coverage depends upon the current condition of the car and the cost of replacing it with a comparable vehicle if it is rendered inoperable due to an accident.
Maintaining proper car insurance is a necessity for individuals who depend on their personal transportation for daily activities. Driving without insurance can result in catastrophic expenses, personal liability for injuries and damage caused by an accident, and even legal action, so it’s essential to purchase and maintain auto insurance in order to remain financially and legally safe.