Cheap car insurance for under 25s
It’s one of the paradoxes of life that young drivers, who are the most cash-strapped driver demographic, are hit with the most expensive insurance rates.
And the younger you are, the higher the insurance rates will be when you try to get cover for your car.
There’s a good reason for this. Young drivers under the age of 25 are more likely to be involved in accidents than other age groups, thanks to a combination of inexperience, risky behaviour and increased likelihood of alcohol and drug use.
In 2016, 20% of the Australians who died on the roads were aged 17-25 years old, despite this group representing only around 12% of the overall population.
Young drivers as a demographic have such a bad reputation that until recently even good young drivers didn’t have many alternatives to the expensive insurance rates slapped on their generation.
Young drivers could only get cheaper insurance rates by driving their parents car on a family policy, taking partial insurance cover, or otherwise downgrading their car options and mobility.
Fortunately advances in telematics technology have made affordable comprehensive insurance for young drivers possible for the first time in the country’s history.
This is thanks to this new technology’s ability to monitor and score good driving behaviour, which means forward thinking insurers are now able to reward safe young drivers with genuinely affordable car insurance.
In Australia UbiCar offers genuine cheap car insurance for young drivers.
Why car insurance is so expensive for young drivers
‘Why is car insurance so expensive for under 25 drivers?’ is a common question among young people shopping around for their first car.
When you find yourself getting quoted several thousand dollars in annual insurance fees it’s natural to wonder why you’re being asked to pay such stiff rates when you did well on your drivers test and have never been involved in an accident.
It’s easy to start feeling like this is just another thing young people are blamed for by their elders, on top of killing the sitcom and popularizing twist off wine caps.
Car insurance risk factors
However, car insurers aren’t giving under 25s a hard time just because they’re young.
The car insurance industry is heavily reliant on being able to predict how likely a driver is to have an accident once they are covered by the insurer.
Data collected by insurers and public authorities scores young drivers as a group poorly across a number of car insurance risk categories.
Risk factors include:
- inexperience in handling a car and dealing with unexpected road hazards
- increased impulsivity and risk-taking while driving
- a party lifestyle which increases risk of alcohol and drug use prior to driving
- increased risk of making errors of judgement.
These factors combine to make young drivers a high risk car insurance demographic due to their increased risk of involvement in all accident types.
Painted with one brush
Needless to say the fact that young drivers are positioned where these risk factors overlap does them no favours when it comes to insurance rates.
What this means is that safe young drivers are not rewarded for behaving responsibly on Australian roads.
Instead they are saddled with the same risk assessment as irresponsible drivers within their age group.
It gets worse than that. Irresponsible young drivers effectively have their insurance rates subsidized by their more careful peers, and end up paying lower rates than they deserve.
They are not helped by the fact that they are novice drivers, which means insurers are unable to refer to an established insurance profile and driving record to determine whether or not individuals within this group are higher or lower risk.
As a result of this, traditional insurers are basically forced to ignore young drivers as individuals and instead price their insurance based on the established driving behaviour patterns of their age group.
Do you have to have car insurance in Australia?
Having surveyed the dismal car insurance landscape that confronts young drivers once they have earned their P Plates you may find yourself wondering what type of car insurance is required by law.
The answer is that it’s illegal to drive a car in Australia without at least 3rd party insurance that provides cover for anyone that may be injured or killed as a result of your driving.
This form of insurance goes by different names in different states and territories.
It is called Green Slip insurance in New South Wales and the Transport Accident Charge in Victoria. Other states call it Compulsory Third Party (CTP) insurance.
This insurance is typically payable when you register a vehicle, and frequently comprises part of your registration fee.
Once you are covered by CTP/green slip insurance you are not legally required to purchase any additional insurance products.
However, should you decide not to take additional cover you could be liable for huge sums of money in the event you are found legally accountable in an accident that causes damage to person or property.
This can result in expensive civil lawsuits.
Traffic and vehicle regulatory offences accounted for the greatest proportion (44% or 240,891) of defendants adjudicated in Australia’s Magistrates’ Courts in 2009–10. Only 1.8% (4,392) were acquitted. Source: ABS
A common civil claim can cost you $40,000 in fees before your case is heard. Source: Crikey
Compulsory car insurance and car loans
While the law doesn’t demand that you take out comprehensive insurance on a car that has been financed by a third party, it is usually a requirement of the lender that your car has comprehensive cover.
This makes sense, because until you have paid off your car, it is effectively the property of the issuer of your loan, and without insurance you’re driving it at their risk.
If you drop your comprehensive insurance before paying off your car loan you will most likely void the terms and conditions of your loan, which could lead to a claim against you in a civil court.
Furthermore, should your car be damaged in an accident you will be expected to continue payments on your car as well as covering the cost of any repairs.
If your car is written off as a result of an accident caused by you, you will either have to continue making payments on the car or settle the loan in a lump sum, without having the benefit of using the car you paid for.
Types of car insurance for under 25s
In reality few young or new drivers are going to hit the road in their first car with only CTP insurance cover.
Most new drivers will want at least some personal protection to add to their green slip insurance in the event they are involved in a car accident.
With this in mind here’s an overview of the different types of car insurance for young drivers in Australia.
CTP insurance for under 25s
We’ve already covered the basics of CTP/ green slip insurance. This insurance covers personal injury costs that can arise from a car accident.
This is locked into the deal when it comes to car ownership in Australia, and protects you from covering the costs of medical treatment and rehabilitation of any individuals you injure while driving.
Third party car insurance for under 25s
Third party property insurance is a step up from mandatory third party insurance, as it covers third party property in the event of an accident.
This means you won’t be on the hook for repair costs to other vehicles if you cause an accident.
Once you’re covered you effectively have comprehensive third party car insurance for a new driver.
However, you’ll need to cover the costs of anything that happens to your vehicle, and in some states your own medical treatment, in an accident you cause.
Third party fire and theft car insurance for under 25s
Third party fire and theft car insurance ensures that you have some basic protection of your own property in place if something goes wrong on the roads, while also providing you with comprehensive third party car insurance for young drivers.
Although your car is not covered for damage sustained if you cause an accident, it will be covered if your car is stolen or damaged by fire.
Comprehensive or full cover car insurance for under 25s
Comprehensive car insurance is the desired level of cover for most drivers.
This covers you for a third party claims and theft, as well as fire, accident, weather and malicious damage to your car.
The exact terms of what is covered by comprehensive insurance will differ from one insurer to the next, with variations in cover for items such as windscreen breakage and sound system theft.
Comprehensive insurance is the most expensive insurance option, and the most complex insurance when it comes to understanding how rates are calculated.
The way you handle the following options will all have a significant impact on your comprehensive insurance rates:
- insuring your car for its market value or agreed value
- the excess payable on any claims made
- inclusion of vehicle rental following accidents
- access to a no claim bonuses, and the terms applying to redeeming this bonus.
Car insurance for young drivers on parents policy
Until recently, driving a car on a parents policy was one of the only ways that young drivers could secure more affordable car insurance.
Adding under 25s to a car insurance policy involves a parent notifying the insurer that a novice driver will be driving a vehicle covered by the existing insurance plan.
This will usually result in the insurance premium increasing.
However, if the novice driver covers the additional cost of the policy this is often cheaper than taking out a separate premium.
While this option works, it has limitations:
- The car registered in the plan has to belong to the plan holder. The novice driver may not own the vehicle and then have it covered by their parents’ plan.
- Higher excess is usually payable in the event that there is a claim made as a result of an incident while the novice driver was behind the wheel.
- The younger the driver the greater the impact on the family policy – adding a P Plater to a family policy may be as expensive as insuring them separately.
The option for putting car insurance for young drivers on their parents policy therefore works best for teenage drivers, before they own their own vehicles and while they are learning the ropes in their parents car.
However, it can be restrictive for older drivers who own their vehicles. Furthermore, not all young drivers will even have the option of being added to their parents’ plan.
Average costs of car insurance for under 25s
Car insurance rates are influenced by a wide range of factors. Nonetheless it is possible to roughly work out what the average insurance rates are across the primary young driver demographics.
Average car insurance rates for under 25s
Car insurance rates for under 25s are higher than for older age groups, but not quite as punitive as for under 21 drivers.
The average cost of car insurance rates for under 25 females is generally slightly higher than for their male counterparts.
The table below reflects average car insurance rates for a 23 year old male and female.
Average car insurance rates for under 21s
Car insurance rates for under 21s and P platers are significantly higher than insurance rates for other age groups. And car insurance rates increase as the age of the applicants decrease.
In most states and territories insurance rates for under 21 females are slightly higher than for their male counterparts.
The table below reflects average car insurance rates for a 19 year old male and female.
Average cost of car insurance for P Platers
The majority of 17 and 18 years olds in Australia are P Platers. P Plate drivers are considered to be the highest risk driver group in Australia and pay the highest insurance rates.
The table below reflects average car insurance rates for a 18 year old P plater
The table below reflects average car insurance rates for a 17 year old P plater
Average insurance rates were calculated by obtaining online quotes for male and female drivers in the specified age brackets.
The four lowest premiums for each gender were used to calculate averages. Quotes reflected pricing on www.comparethemarket.com.au for October 2018.
The car used for quotations was a white 2018 Toyota Yaris 1.3 mpi five door hatchback with manual transmission and petrol engine.
No additional accessories or factory/dealership options selected. Car parked in a garage overnight. No existing accident or hail damage, and car financed by lease.
For all drivers estimated driving mileage was set to 6,000 km annually, and drivers indicated as having no prior claim history.
Identical residential addresses were used for each gender and age group in the relevant state or territory.
How to find cheap insurance for under 25s
Figuring out how to find cheap car insurance for P platers and young drivers can be an exercise in frustration.
Shopping around at the different insurers typically helps young drivers or their parents shave small amounts off premiums without ever coming close to securing genuinely affordable insurance rates.
Instead young drivers have typically been advised to take one or more of the following steps to reduce their insurance premiums:
- Choose models of car that attract lower insurance premiums, which usually means driving small, cheap, low performance cars without any factory add-ons or modifications.
- Take ‘pay as you drive’ policies that discourage car use in return for a lower insurance rate.
- Avoid claims for minor accidents in order to avoid losing a no-claims bonus which would be used to subsidize high insurance costs.
- Select a higher excess to reduce insurance costs, which would also prevent claims on minor accidents and result in a large expense in the event of more serious accident damage.
Note that safer driving, the one activity that is highly likely to reduce risk of accident risk and the probability of making an insurance claim, doesn’t even enter this equation.
The best car insurance for under 25s is here
Fortunately specialist young driver car insurance is now available in Australia, following UbiCar’s launch of Australia’s first mobile telematics insurance app.
UbiCar offers the best car insurance for young drivers who behave responsibly on Australia’s roads, incentivising and rewarding safer driving with genuinely affordable car insurance quotes for under 25s.
What UbiCar customers say
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*Savings are factual and based on comparison between the customer’s current Comprehensive Car Insurance policy with UbiCar as of December 2018 and their policy with their previous insurer. Premiums and savings may differ depending on individual circumstance.
If you still have questions regarding car insurance for under 25s then you may find these answered in our FAQs below.
P platers are required to have CTP/green slip insurance cover before they drive but are not legally required to be listed on a more comprehensive parent or family insurance policy.
However, should the P plater drive a car listed on that policy and become involved in an accident, the policy holder may either be liable for a higher excess or the insurer may refuse to cover any claims arising from the accident altogether.
Therefore it is always advisable to list P platers on family car insurance policies if they will be driving the family car.
It is illegal to drive a car without Compulsory Third Party (CTP) or equivalent insurance in Australia.
However, other forms of car insurance are optional. In the event an accident occurs without additional cover a driver may be liable for other 3rd party damage claims, and this may result in a civil lawsuit.
There are two types of third party car insurance, one covers individuals injured or killed by a driver in an accident.
The other covers damages to third party property or vehicles in an accident. Third party insurance covering personal injury and death, also known as Compulsory Third Party (CTP) insurance, is a legal requirement for driving a car in Australia.
However, drivers are not required to take out cover for damage to third party property or vehicles.
View our insurance comparison table for more information on how different types of third party insurance differ in Australia.
Compulsory Third Party (CTP) insurance is compulsory in Victoria. However, no other forms of car insurance are mandated by the state.
Relying on CTP insurance is not recommended as you have no cover for any property damages in an accident, or any kind of damage to your vehicle.
To find out more about the different types of insurance available in Australia, view our insurance comparison table.
Green slip insurance is a legal requirement for driving a car in New South Wales.
This is Compulsory Third Party (CTP) car insurance that covers third party injury or death. Additional insurance cover is not a legal requirement for driving a car in the state.
With that said, it is not advisable to drive a car without any cover for damages to property that may arise in an accident.
View our insurance comparison table for more information on types of cover available in Australia.
Compulsory Third Party (CTP) insurance is a legal requirement for registering a vehicle in Queensland.
However, drivers do have the option of choosing an insurance provider for CTP cover. No other forms of car insurance are a statutory requirement under Queensland state law.
While CTP is the only legal insurance requirement in Queensland, bear in mind you may be liable for damages in an accident which could result in a civil claim.
Taking only CTP cover is therefore not advisable, and you can find out more about other insurance options here.
Residents of Western Australia are required to have Compulsory Third Party (CTP) insurance when driving.
This insurance is automatically provided when registering a vehicle. No additional cover is required by law.
In the event of an accident you may be liable for damages to property even if you have CTP insurance.
You should therefore review all available insurance options before making the decision to drive with minimal cover.
Drivers in South Australia are required to have Compulsory Third Party (CTP) insurance.
This is paid whenever a motor vehicle is registered. No additional car insurance cover is required by state law.
However, it is not a good idea to drive a car with only CTP insurance.
In the event of an accident you could easily incur large damages claims. Click here to view additional insurance options in South Australia.
Tasmania drivers are required to be covered by Compulsory Third Party (CTP) insurance.
No additional insurance is mandated by state law.
Before settling for compulsory insurance we recommend that you view additional insurance options that will also provide cover for damages to property in an accident.
In Northern Territory you are not permitted to drive a vehicle that hasn’t been covered by Compulsory Third Party (CTP insurance).
This is paid as part of vehicle registration fees. No additional cover is required by the territory’s laws.
Residents of Northern Territory are nevertheless advised to explore additional insurance options once they have CTP insurance cover.
These can cover damage to property in the event of accidents, as well as theft and fire damage to your car.
Compulsory Third Party (CTP) insurance is compulsory in ACT. Drivers have a choice between four insurers who provide this cover.
While additional insurance is at the drivers discretion it is recommended to take out further insurance cover.
This will protect you against claims relating to damage of property or damages to, or loss of, your own vehicle. You can view your additional insurance options here.
Teenage driver insurance laws do not differ from standard laws.
If you’re a parent, you have to insure your teenage driver.
However, you are only legally obligated to ensure that they are covered by CTP or green slip insurance, and car insurance laws in Australia do not require you to take out any additional cover for your young driver.
When it comes to traditional insurance, the cost of car insurance depends on the age of the driver and available insurance claim records.
While younger drivers will always pay more for insurance, older drivers who get their P plates after the age of 25 will also pay increased rates due to their lack of experience and absence of a no claims history.
At UbiCar we take the driver’s behaviour on the road into account and this is a major factor in determining insurance costs, making age a less important consideration.
17 year old drivers pay the highest car insurance rates.
In some states and territories a few major insurers will not provide cover to this age group, and when they do the costs can run as high as seven thousand dollars a year.
UbiCar is the first company to offer specialist young driver insurance in Australia that’s affordable.
18 year olds pay stiff insurance rates at traditional insurers, and in most states and territories you’ll pay upwards of $2,000 a year for comprehensive cover.
Fortunately UbiCar offers specialist under 21 car insurance that factors in the way young drivers behave on the road, providing substantial savings to 18 year old drivers and other novices.
The cost of car insurance for under 21s is amongst the highest in the country, and the younger the driver within this age group, the higher the insurance premium.
17 year old drivers can pay several thousand dollars a month for insurance at some traditional insurers, with rates decreasing slightly as ages increase within this age bracket.
UbiCar offers specialist young driver car insurance, which allows us to provide affordable car insurance for under 21s.
To compare UbiCar’s rates to average rates for traditional insurers view our comparison table.
The cost of traditional car insurance can vary considerably across the under 25 age bracket depending on the level of experience of the driver.
However, the cost of car insurance for under 25s remains higher than the average of adults as all drivers within this bracket are considered relatively high risk by traditional insurers.
UbiCar’s specialist under 25 car insurance has made car insurance for safe young drivers in this demographic affordable for the first time.