Why is 25 an important age to insurance companies?

Question

ive been insurance shopping for a Mazda 6. I turn 25 next March and most reps have been telling me that my insurance will drastically degrease when I turn 25. Why is this such an important age?
I dont drink, i graduated college and I havent been in an accident since high school (and that wasn't even my fault). I have one speeding ticket in the last 5 years.

Answer 1

Well, it's not for EVERYONE, and not in ALL States . . . but in general, there are fewer accidents for people who have been driving 7 years and are over 24, so that's reflected in the rates.

It's all a buncha statistics.

Answer 2

It's an arbitrary number, like 18 for voting, 21 for drinking, 65 for social security retirement.

For various reason's age limits have to be set somewhere, and community standards, or social mores settle down at various points.

Reaching one's18th birthday does not, suddenly make somone wiser or more politically astute, but our culture assumes that by surviving that long, one will have PROBABLY reached some degree of maturity.

However, with insurance companies, their "age 25" limit is founded more on statistical records than on some number out of the hat. If the number of claims made due to drivers under the age of 25 is statistically more significant than the number made by drivers 25 or over, then the higher premium rate is justified and makes good business sense. The insurers don't even have to analyze the "why's" such as driving experience, income, family responsibility. They just have to look at numbers that represent the cost of doing their business.

Answer 3

Everything in insurance is measured by actuarial science. If the industry choose that age it is because studies and numbers say for a fact that at 25 you are responsible enough. Before 25 some companies actually give discounts if you have a good driving history, good grades, where you work (if you work in an office or are driving around), hey even for the color of your car. Ask your broker about this. And yes this is all based on actuarial science as well!

Answer 4

Interesting question. I would have to assume that it is because around the age of 25 people start to make big changes in their life.

Like you said they graduate college (hopefully), maybe start a family, start to hold a steady job, and if single are no longer eligible to be covered by their parents insurance.

So I would think it is because you become more stable.

I've actually been interested in different insurance questions, I found a site that has a few articles that are interesting on life insurance, health insurance and other things. They also have links to big companies to get side by side comparisons of plans for free!!

Check it out at http://www.finance-your-life.com

Happy Friday!

Dave

Answer 5

It used to be before prop 107, however the companies now use your driving years and experience not your age anymore in California but the ranking driving years are 3, 9, 14, 18 and after 18 it does not make a lot of difference.

Answer 6

That is the age males statistically have a big drop in accidents, tickets. For women, the age is either 21 or 23.

Answer 7

With age comes experience. And statistics have shown that your possibility for having an accident/ticket/claim decrease after age 25.

Answer 8

Because life isn't fair. Just because there are a bunch of idiots under 25 wrecking cars, you are stuck paying a higher bill.

Answer 9

It is a point for insurance companies to maybe lowered your rates. They figured you are a more responsible driver. It is all statistics.

Answer 10

because that is the age that most men start to act a little less like a large child...."little" being the operative word.