Young drivers are often not economically active but have to face the reality of higher car insurance premiums that older adults. Car insurance companies assess the risk profile of an individual when determining premiums but these factors are based on group risk. Young drivers are known to be a higher risk group and therefore face higher car insurance premiums. But this does not last forever. In South Africa, under 25 car insurance is more expensive but once you pass the age of 25 years, your premiums will become cheaper to some degree. However, it also depends on your claim history and gender as accident free drivers and women will benefit with lower premiums.
Why do young drivers pay more?
Insurers base risk profiles on the history of claims in the industry. Claim statistics and the advice of actuaries has prompted insurers to charge under 25 drivers a higher premium and claim excess. Even without an inside knowledge of car insurance claims and acturial science, we all know why young drivers may be penalised. The fact of the matter is that the younger you are the more reckless you are and this can translate into more accidents. Youth is a time of immaturity where the consequences of one’s actions are not always understood. Speeding, driving under the influence of alcohol and amateur stunt driving are common practices among young drivers.
Apart from immature behaviour, much also has to do with driver experience. Even sombre young drivers may find themselves in situations where their inexperience behind the wheel means a greater likelihood of an accident. It is also about the claim amounts among younger drivers versus younger drivers. While not every young driver is reckless, the overall risk of this age group means higher premiums for all drivers under the age of 25 years. If the claims history of younger drivers reduced over time then eventually the premiums of younger drivers would decrease. However, this is about changing the behaviour of an entire generation.
Premiums and Excess
It is important that young drivers look beyond their monthly car insurance premiums. The fact is that your insurance commitment does not end at just your premium. It is important to carefully look at the excess. All too often, in the search for cheap car insurance, young drivers do not focus on the excess at the time of a claim and focus entirely on what they will be paying every month. While signing up for car insurance cover with a higher excess will reduce your monthly premiums, it can work against you at the time of a claim. But can you afford the excess? As a young person, especially if you are not working or still studying, your ability to pay a large cash amount as an excess may be difficult and sometimes impossible. Your car insurance does little to assist you in the event of repair or replacement if you cannot afford the excess.
Penalty for Young Drivers
Remember that at the time of a claim there is an added penalty for being an under 25 driver. This ultimately translates into a higher excess at the time of a claim. Even if you are driving a car belonging to your parent or the owner and insured is an older person, if a young driver was behind the wheel at the time of an accident, a penalty is imposed as with the insurance excess. Car insurance companies impose a penalty between R1,000 to R2,500 extra on top of the excess for young drivers. Without paying the penalty, you car will not be repaired or replaced. Relying on car insurance purchased by older drivers can therefore still cost you more as younger driver. Therefore it is better to buy car insurance specifically for younger drivers, like student car insurance policies, or declare the age of all drivers of the vehicle at the outset.