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Car insurance for college graduates

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Graduating college is exciting, but it can also be expensive — especially when considering car insurance as a financial obligation alongside student loan debt. College graduates may be moving to a new city or state, adjusting to a new job and handling their finances alone for the first time, or under new circumstances. While car insurance may not seem like a top priority or consideration, having a policy to adequately protect your financial interests — especially as you set out on your career and start building your wealth — is an integral part of financial planning. Bankrate can help college graduates understand how much a car insurance policy could cost, what factors impact your premium and how to save.

How much is car insurance for college graduates?

According to Bankrate’s 2022 study of quoted annual auto insurance premiums, the average cost of full coverage car insurance is $1,674 per year, or $140 per month. Compared to the national average for 40-year-old drivers, college graduates should understand that their rates will likely be much higher. Higher rates for college graduates are largely due to the increased risk of being involved in a car accident due to the young age and limited driving experience of most graduates. According to Centers for Disease Control and Prevention (CDC) data, 25% of all distracted drivers involved in fatal crashes in 2018 were aged 20 to 29. With the many college graduates completing school between the ages of 20 and 23, insurance companies may attribute a greater level of risk when determining premiums for this demographic, typically resulting in a higher premium.

In most states, gender also typically plays a role in how insurance providers determine your premium. The table below illustrates how both age and gender impact car insurance rates for college graduates.

Age Average annual full coverage premium for males Average annual full coverage premium for females
18 year old $5,650 $4,844
19 year old $4,487 $3,807
20 year old $4,098 $3,492
21 year old $3,166 $2,769
22 year old $2,913 $2,578
23 year old $2,733 $2,446
24 year old $2,590 $2,332
25 year old $2,183 $2,038

Rates reflect a renter with their own auto insurance policy.

How being a college graduate impacts car insurance

College graduates are typically just starting out in their careers and may be handling their finances alone for the first time. It may feel challenging to keep tabs on all your bills, like your utilities, renters insurance and car insurance, grocery bills and debt repayments, and to budget your spending accordingly. In most states, you’ll be required to purchase a car insurance policy in order to legally operate a vehicle. If this is your first time on a policy of your own, it’s important to know that a number of factors impact your car insurance rates, which could also help you know how to lower your premium.

  • Geographic location: Where you live in the country has a big impact on how much you pay for car insurance. In some areas, the cost of living, medical expenses and vehicle parts and repairs could be higher, as well as a higher likelihood of accidents — all of which affect premiums. According to Bankrate’s 2022 study of quoted annual auto insurance premiums, Louisiana, Florida, New York, Michigan and Nevada are the nation’s most expensive states for car insurance. After graduation, college students may want to consider insurance rates associated with states they may be considering moving to, if budget is a concern.
  • Credit score: You may be surprised to learn that, in most states, car insurance rates vary by insurance-based credit score. Generally, drivers with poor credit pay higher premiums, as they are statistically more likely to file claims. College graduates with student loan debt may find that they face higher premiums as a result. Even if you have no debt, you may not have much credit built up due to your age, which can have a negative impact on your overall insurance-based credit score. Building your credit history might help you find lower premiums over time.
  • Driving record: Young drivers (under 25 years of age) are among the most risky and expensive age groups to insure, due a higher likelihood of accidents leading to costly claims. If you can maintain a clean driving record — meaning no speeding tickets, accidents or DUI convictions — you may avoid even higher rates upon renewal or when applying for a new policy. In some cases, your motor vehicle record also impacts your eligibility for coverage altogether.
  • Annual mileage: An insurance company may ask how often you drive and how far you drive each day, week or year in order to gauge how often you are on the road. Being a frequent driver equates to more opportunities to be involved in an accident and file a claim. The more miles you drive, the more you may pay for car insurance premiums. However, the reverse is also true; the fewer miles you drive, the more you might save.

Cheap car insurance for college graduates

While many things can negatively impact the cost of car insurance for college graduates, there are steps that you can take to lower the financial burden. For instance, making timely payments on your student loans can help improve your credit score which could result in a more favorable rate over time, if you live in a state that allows credit as a rating factor.

Additionally, maintaining a clean driving record for five years or more might earn you more affordable rates than those who have accumulated multiple traffic violations. Perhaps the best way to ensure you find the cheapest rate for car insurance as a college graduate is by thoroughly researching the providers in your region. Each insurance company’s rates are different, so you should be able to find the most affordable fit by shopping around and comparing multiple quotes from separate providers.

College student discounts

In addition to driving safely, improving your credit score and shopping around, college students may be eligible for special auto insurance discounts based on their location and academic performance:

  • Good student discounts: If you graduated with a B or better letter-grade average, some car insurance companies will offer you a good student discount on your policy, up to age 25, even if you’re no longer in college. Be sure to discuss the eligibility qualifications with your agent for this savings opportunity.
  • Distant student discounts: Generally distant student discounts are given to students who go to school 100 or more miles away from home who do not take a vehicle with them. If you were on your parents’ policy and had this discount, you will likely lose it once you graduate, since you are no longer a student. However, if you plan to go on to pursue a graduate degree and you still do not have a car on campus, you may still be eligible for this discount. Speak with a licensed agent to determine whether this discount works for your situation.
  • Young driver programs: Although you may be feeling like you have fully reached adulthood upon graduating college, insurers still generally consider you to be a “young driver” until you are 25. As such, you may be eligible to participate in the young driver programs that companies offer, which could help you save on insurance costs by practicing safe driving.

Other ways for college graduates to save on car insurance

Aside from discounts, driving behavior, credit score improvement and shopping around, college graduates may find additional ways to save through the following methods:

  • Compare vehicles: Insurance companies may consider certain vehicles a higher risk to insure than others. Before purchasing a vehicle, consider researching if the car you plan to drive is considered high-risk by your provider.
  • Increased deductible: Full coverage policies have two deductibles: one for comprehensive coverage and one for collision coverage. Raising your deductible means you are willing to cover more expenses out-of-pocket in a claim for damage to your own car, but it can also provide immediate savings on your premium to help you allocate funds for the unexpected. Just make sure you choose a level you can afford to pay if you do file a claim.
  • Bundle insurance: If you own or rent a home following graduation, consider bundling a homeowners insurance policy or renters insurance policy with your auto insurance. Doing so could save you a significant amount, depending on which provider you select.

Coverage options to consider for recent college graduates

Along with the cost of insurance, college graduates may want to consider the range of coverage options their policy includes. The following are some car insurance coverage options that college graduates may wish to consider adding to their policies for greater financial protection:

Roadside assistance

Many insurance providers offer roadside assistance as an optional add-on. This protection is intended to help you connect with your provider’s roadside assistance network if your car breaks down unexpectedly.

Glass insurance

Some providers offer endorsements specifically for the glass in your vehicle. A windshield replacement or glass chip can be expensive to repair, but if you have a “full glass” endorsement on your policy, you may not need to pay your comprehensive deductible to have the glass restored. Especially if you live in an area with a high rate of property crime, glass insurance coverage could prevent you from shouldering the weight of this financial burden.

Guaranteed asset protection (GAP coverage)

Gap insurance helps ensure that you can settle the debts on your car loan if your new vehicle is deemed a total loss following a covered accident. The moment you leave the car lot, your car begins depreciating in value. With gap insurance, the difference between the balance of your car loan and what the vehicle is actually worth may be covered, preventing you from having to pay out of pocket to pay off your loan.

Frequently asked questions

Should I stay on my parents’ policy?

The decision to remain on your parents’ policy depends on your circumstances. While you are away at school, most insurance companies still view you as a household member and allow you to stay on your parents’ policy, assuming that one or both of your parents owns or co-owns your vehicle. If you own your vehicle outright, you may need your own policy. However, once you graduate and establish your own household, you’ll need your own car insurance policy.

What is the cheapest car insurance for a college graduate?

The cheapest car insurance provider for college graduates largely depends on the specific characteristics of the policyholder. In general, college graduates pay more than the national average annual cost of car insurance. However, good students, distant students, safe drivers and policyholders with good insurance-based credit scores may receive more favorable rates. Additionally, geographic location impacts the total cost of an insurance policy. Consider shopping around to determine which carrier offers the cheapest coverage in your region.

What is the best car insurance for college graduates?

Finding the best car insurance company for your needs typically requires doing comparison research. Carriers differ in rates and coverage options, some of which may be better suited to meet your individual needs than others. While an insurer may have affordable rates and robust coverage options, it might also have poor financial strength or below-average customer satisfaction, which could negatively impact your insurance experience over time. Research the list of providers in your area to make the most informed decision.

Why is car insurance so expensive for college graduates?

The biggest factor weighing against college graduates in terms of car insurance affordability is their age. Drivers aged 20 to 29 were involved in 25% of distracted driving fatalities in 2018 alone, according to the CDC, making them particularly risky to insure. For this reason, rates may be much higher for drivers in this age group than for their older, more experienced counterparts.

Methodology

Bankrate utilizes Quadrant Information Services to analyze 2021 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:

  • $100,000 bodily injury liability per person
  • $300,000 bodily injury liability per accident
  • $50,000 property damage liability per accident
  • $100,000 uninsured motorist bodily injury per person
  • $300,000 uninsured motorist bodily injury per accident
  • $500 collision deductible
  • $500 comprehensive deductible

To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2019 Toyota Camry, commute five days a week and drive 12,000 miles annually.

These are sample rates and should only be used for comparative purposes.

Age: Rates were calculated by evaluating our base profile with the ages 18-60 (base: 40 years) applied. Depending on age, drivers may be a renter or homeowner. Hawaii rates indicate age is not a contributing factor.

Gender: the following states do not use gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, Montana, North Carolina, Pennsylvania.

Written by
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Insurance Editor