Why young drivers must budget for insurance

More than half of young drivers underestimate the cost of their first car insurance policy.

New research for RAC Black Box Car Insurance shows that 56% of the 500 young drivers they surveyed expected their first premium to be under £750 when the average insurance cost for 25-year-olds and under is nearer £810 a year.

Average young driver policy costs show 18 to 20-year-olds pay the most at £972 a year, compared to the average UK private car driver premium of £367.

Insurance is seen as the greatest barrier to owning and running a car with 62% of those questioned saying this was the case, as opposed to 22% who felt it was buying a car and 12% who cited day-to-day running costs.

The RAC research also showed:

• 17% of young motorists budget £750 to £999 for annual insurance
• 15% opted for £1,000 to £1,500
• 9% planned for £1,500 to £2,000
• 5% budgeted £2,000 for their annual premium

When it comes to arranging first-year insurance, mum and dad came to the rescue as half (51%) said they had help from their parents. Four in 10 (43%) paid their premium in one go with a similar percentage (44%) opting for monthly payments.

“The cost of car insurance for young and new drivers is unquestionably high due to the high cost of claims, and unfortunately we expect it to increase over the next few years which will make it even harder for young drivers to get motoring,” said RAC Insurance director Mark Godfrey.

“But it doesn’t have to be that way with a ‘black box’ policy which allows new drivers to prove how safe they are.

“The beauty of telematics is that it is fairer for young drivers as, rather than simply rating them in line with every other young driver, they can be judged on their own driving ability and potentially earn cheaper insurance premiums and renewals as a result.”

Telematics policies such as RAC Black Box Car Insurance operates via a matchbox-sized telematics device which tracks speed, braking and acceleration along with where and when the policyholder drives in order to calculate how safe they are through a Driver Score. However, some telematics policies also impose a curfew and/or mileage limits.