Graduating college is exciting, but it can also be expensive — especially when adding car insurance to the mix of student loan debt. College graduates face unique challenges that other age groups do not when shopping for insurance policies. Understanding the factors that impact insurance quotes for college grads can help shoppers find better, more affordable solutions.
How much is car insurance for college graduates?
According to Bankrate’s 2021 study of quoted annual auto insurance premiums, the average cost of full coverage car insurance is $1,674 per year, or $140 per month. While that might seem reasonable, college graduates should understand that their rates will likely be much higher than the average. Higher rates for college graduates are largely due to the increased risk for being involved in a car accident because of young college graduates’ age. According to Centers for Disease Control and Prevention (CDC) data, 25% of all distracted drivers involved in fatal crashes in 2018 were aged 20 – 29. With the many college graduates completing school between the ages of 20-23, carriers are more cautious when insuring these individuals, typically resulting in a higher premium.
Gender also typically plays a role in how insurance providers determine your premium; however, not all states include this as a rating factor when setting rates. The table below illustrates how both age and gender factor into the rate for car insurance for college graduates.
| Age | Average annual premium for males | Average annual premium for females |
|---|---|---|
| *18 year old | $5,646 | $4,839 |
| 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 |
*18-year-old rates reflect a renter with their own auto insurance policy.
How being a college graduate impacts car insurance
Affording car insurance as a college graduate can be challenging for some. As mentioned, there are certain aspects that may inherently make finding the best car insurance for recent college graduates more difficult or expensive, such as age or gender. Not only are these determining factors in how affordable their auto insurance will be, but college graduates may also be impacted by the following:
- Geographic location: If you went to college out of state and are planning to continue living near your alma mater, you may end up paying higher rates for car insurance. According to Bankrate’s 2021 study of quoted annual auto insurance premiums, Louisiana, Florida, New York, Michigan and Nevada are the nation’s most expensive states for car insurance.
- Credit score: College graduates tend to be either building their credit or managing a below-average credit score due to their student loan debts. While making payments on time can help improve your credit score, an already low score may result in a higher quote (for states that allow credit as a rating factor). If you are in the process of rebuilding your credit, you may see some rate improvements in shopping around the more progress you make.
- Driving record: Young drivers can benefit from developing safe driving habits early. Your driving record is used by insurance carriers to determine your individual risk profile. If you have a poor driving record, your provider will likely assume a higher degree of financial risk, resulting in a higher premium.
- Annual mileage: College graduates are usually eager to get jobs in their field of study — regardless of how far the commute may be. However, the additional miles on your car means you are on the road more often and that signals to insurers that you have more opportunities to be involved in an accident and file a claim. The more miles you drive, the more you could end up paying for car insurance.
Cheap car insurance for college graduates
While there are many things that 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 for a more favorable rate, in case you live in a state that allows credit as a rating factor.
Additionally, maintaining a clean driving record for five years or more is likely to earn you more affordable rates than those who have accumulated multiple traffic violations. Perhaps the best way to ensure you receive the best rate for car insurance as a college grad is by thoroughly researching the providers in your region. Each carrier’s rates are different, so it could be beneficial to shop around and receive 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. Many insurance carriers offer distant student discounts and good student discounts to help college students save on their car insurance needs. Good student discounts are typically applied when a student maintains at least a B average, is enrolled full-time and is aged 18-22. The following are just some insurance carriers that offer savings based on student performance and location:
| Car insurance company | No discount | Good student discount | Distant student discount |
|---|---|---|---|
| Nationwide | $345 | $285 | $341 |
| USAA | $514 | $457 | $519 |
| Auto-Owners | $844 | $579 | $833 |
| State Farm | $739 | $531 | $729 |
| Geico | $436 | $323 | $433 |
*Rates calculated for a 22 year old added to parent’s policy
Other ways for college graduates to save on car insurance
Aside from discounts, driving behavior, credit score improvement and shopping around, college graduates can find additional ways to save through the following methods:
- Compare vehicles: Insurance carriers 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: Raising your deductible means you will need to pay more out of pocket in a claim, but it could also mean immediate savings on your premium to help you allocate funds for the unexpected.
- Bundle insurance: If you rent or own a home following graduation, consider bundling a renters’ or homeowners’ insurance policy with your auto insurance. Doing so could save you a significant amount, depending on which provider you select.
Coverages to consider for recent college graduates
Along with the cost of coverage, college graduates need to consider the breadth of coverage their carrier is able to provide. The following are just some optional car insurance coverages that college graduates may wish to consider adding to their policies:
Roadside assistance
Many insurance providers offer roadside assistance as an optional add-on. With it added to your policy, you will be able to connect with your provider’s roadside assistance network if your car breaks down unexpectedly.
Glass insurance
Some providers offer special policies specifically for the glass in your vehicle. Replacing glass in your windshield or car windows can get expensive, so it may be in your best interest to have this policy in place. 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 auto protection
Gap insurance helps ensure that you can settle any debts on your car loan if the 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, you could claim the difference between the balance of your car loan and what the vehicle is actually worth, preventing you from having to shell out money for a totaled car.
Frequently asked questions
Should I stay on my parents’ policy?
The decision to remain on your parents’ policy is completely up to you. On one hand, many insurance providers offer discounts for holding multiple policies. If that is the case with your parents’ provider, it may be more financially beneficial for both of you to keep the policy. On the other hand, your parents’ provider may not have the coverage options you need or may penalize high-risk age groups too harshly. If that is the case, you might want to seek out alternative providers.
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 will pay more than the national average annual cost of car insurance. However, good students, distant students, safe drivers and policyholders with strong credit scores may receive more favorable rates. Additionally, geographic location may impact the total cost of an insurance policy. Always 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 for college graduates means doing thorough research. Different carriers offer different rates and coverage options, some of which may be better suited to meet your individual needs than others. While a provider might appear to be affordable and robust, they could have poor financial strength or below-average customer satisfaction. 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 – 29 were involved in 25% of distracted driving fatalities in 2018 alone, 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 coverages that meet 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.
Gender: the following states do not use gender as a determining factor in calculating premiums: California, Hawaii, Massachusetts, Michigan, Montana, North Carolina, Pennsylvania.
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