Understanding young drivers’ car insurance (under 25)

When you get car insurance in New Zealand, you’ll be asked to name the drivers and whether any of them are under 25. If a driver is under 25, you’ll pay a higher premium. What’s more, the excess you pay will be much higher if someone under 25 (classified as a young driver) is driving the car when an accident or damage occurs. This article explains why and suggests ways to avoid paying more than you need to.

Why does car insurance cost more for drivers under 25?

The cost of car insurance is based on the risk to the insurer. There are all sorts of things that influence this, including the car’s value and how much parts cost, as well as road conditions, amount of traffic and car theft rates in your area.

Younger drivers have less experience, so it’s not surprising that they have more vehicle calamities. Most incidents are minor collisions with other cars or simply misjudging something like the distance to a panel-destroying rock wall. And some are caused by over-confidence, distractions, risk taking and not driving to the conditions.

Young drivers don’t set out to have an accident, however data from Waka Kotahi showed 85% of minor crashes in the 18 months to June 2022 were at least partly caused by young drivers. That’s despite under-25s only making up a small percentage of drivers on the road.

As a group, young drivers under 25 represent a higher risk to car insurance providers, which is reflected in the higher premiums and excess payments they charge.

How much extra does car insurance cost for younger drivers?

Car insurance premiums depend on so many factors that it’s difficult to single out the extra amount a younger driver pays. But it seems that the younger you are, the more you pay. In other words, a 17-year-old pays more than a 21-year-old. Once a driver reaches 25 there’s quite a big premium reduction. Depending on the insurer, male drivers pay between $40 and $400 more a year for comprehensive cover than female drivers of the same age. How long the driver has been driving is another factor, so more experience tends to mean a lower insurance cost.

One of the more obvious differences happens with the excess. This is the fixed amount the vehicle owner pays towards any claim. A standard excess might be something like $400. The additional amount for a younger driver is often listed separately, so it’s easy to see the difference. Most policies add an extra $500 or so to the excess for drivers under 25 and some add $750 for drivers under 21. This would bring the total excess to around $900 and $1150 respectively.

Parents POV: What to do if someone under 25 will be driving your car

If your son, daughter or any other driver under 25 is going to be driving your car, it’s important to let your insurance provider know, so they can be named on the policy. This applies even if it’s just for a few weeks while they’re home on university holidays. Otherwise, you might not be covered if they’re driving and they damage your car, another vehicle or someone else’s property. Your insurance premium will probably increase and the insurer will send you a new schedule that confirms the additional excess you’ll have to pay when claiming for an event while anyone under 25 is driving.

Because different insurers treat under-25 drivers differently, it’s usually a good time to shop around and compare quotes from at least three insurance providers. If you find a better deal, you might want to move your other policies as well, to keep a multi-policy discount. If that doesn’t appeal, you could always let your current insurer know what you’ve been offered elsewhere and ask if they will price match.

If your car has a high value or is quite expensive to repair, you could consider buying your child an older, cheaper car. It might save on insurance costs overall and avoid the stress of seeing a scrape down the side of your pride and joy.

To reduce the premium, some parents put their child’s car in their own name, pretending they’ll be the main driver and simply naming their child as an under-25 driver on the policy. Apart from being insurance fraud, this is not recommended as you may find a claim is declined if you’re not really the main driver. Insurance companies are pretty good at recognising when this might be the case and gathering further evidence if required.

Young driver’s POV: How to get the best car insurance deal if you’re under 25

Before you buy a car, it pays to compare insurance costs for the different makes and models you’re considering. It’ll also mean you already know who’s offering the best insurance for younger drivers, so you can quickly arrange cover when you’ve found the car you want.

Even if you’re just renewing your policy, the most important thing to do is get a few insurance quotes and check the policy details to make sure you’re getting the cover you need. For example, a market survey in 2022 found comprehensive (full) cover for a $9,000 car driven by a 17-year-old in Auckland varied between insurers from about $1,200 to $2,700 a year.

Here are some other ways you might be able to reduce the premium you pay with any insurer.

  • Buy a small engine hatchback that’s a popular make and model, but not a favourite target for thieves.
  • Don’t buy a car that has after-market modifications, such as a big sound system, non-factory mag wheels, a cool glittery paint job, spoilers, lowered suspension and so on.
  • If you have other types of insurance, such as renter’s insurance for your possessions, you can often get a multi-policy discount if they’re all with the same insurer.
  • Live somewhere with a garage or off-street parking if you have the option.
  • Consider third party only or third party, fire and theft cover, rather than comprehensive cover. But be aware that you could lose all the money you spent and have no car if it’s written off in an accident.
  • Use public transport when you can to reduce the kilometres you travel each year. Fewer kilometres usually means a lower premium.
  • Pay your premium annually in advance, rather than in monthly instalments. If you cancel they’ll refund the portion that’s still in credit.
  • Consider opting for a higher excess if you’re confident you’ll always be able to pay it, otherwise you won’t be able to claim.
  • When you renew your policy each year, ask how much they’ve reduced your premium by – now that you’re a year older and have another year’s driving experience.
  • Always shop around when renewing each year to see if you’re getting good value. If you don’t want to switch insurers to get a lower premium, at least ask your insurer if they’ll match a competitor’s price.

Finally, if any of your details on the policy change, be sure to let your insurer know or you might not be covered. This can include things like a change of address or another driver using your car regularly. If you start using your car to earn an income, such as delivering takeaways, definitely let your insurer know. For more see our article on Business or personal – getting your cover right.

Next steps

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an insurance advice service. It is only intended to provide education about the New Zealand insurances sector. Nothing in this article constitutes a recommendation that any type of insurance cover is suitable for any specific person. We cannot assess anything about your personal circumstances, all of which are unique to you. Before making insurance decisions, we recommend you seek assistance from an insurance adviser or expert.

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