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Will car insurance be cheaper if you are retired?

Here's what you need to know...
  • Insurance rates are based on age and may begin to climb for older and riskier drivers
  • Retiring can lower rates if you once commuted to work and now only drive for pleasure
  • It is important to lower annual mileage estimates to reduce rates if you drive less
  • Check to see if you are still eligible for professional association discounts
  • Always reassess auto insurance needs at major milestones in your life

You build up quite a sizable nest egg throughout your years of employment just so that you’re able to afford to enjoy life and live comfortably. As you plan, you may begin to assess all of your monthly expenses and how your retirement will impact them. While some recurring drafts for things like cable and or cell service aren’t directly impacted by your new-found freedom, other expenses that are based on your lifestyle and habits might be.

One of the expenses that very well could plunge when you reach retirement is your auto insurance. Start comparing car insurance rates now by using our FREE tool above! While it’s possible that you can lower your premiums when you’re no longer commuting to and from work, there’s always a chance that the rates could stay level. This is because there are a number of areas where premiums drop due to a life event like retirement. Read this guide to auto insurance premiums after retirement and you’ll be able to look in the right places for savings that you deserve.

Understanding How Auto Insurance is Rated

Before you really can grasp how premiums can change at retirement, you need to truly understand how insurance companies set their rates and underwrite policies for risk. In the world of insurance, the rates go up or down when a client becomes more or less of a risk. What you as an everyday consumer considers a risk and what the insurer considers a risk are two very different things.

Large insurance companies hire actuaries and spend tons of money doing research to see which habits and personal factors has the greatest effect on risk.

A household is believed to be the riskier when it’s, statistically speaking, more likely to file a claim. You might not think that your commute or your age licensed should have any bearing on what you pay, but the insurers do.

There are factors that are dependent on your actions and choices and others that you can’t change no matter what you do. Here are just some of the largest rating factors that can affect rates when they change:

  • Age at the start of the policy period
  • Age licensed and years of experience
  • Gender
  • Driving record
  • Vehicle usage patterns
  • Annual mileage estimates
  • Territory where vehicle is primarily parked
  • Type of vehicle and vehicle safety rating
  • Type of coverage and coverage limits purchased

Rates Depend on the Age at Retirement

The official full retirement age to receive 100% of your Social Security benefits is currently 65 for anyone born before 1943. This “normal” retirement age strictly affects how much money you will receive from Social Security but doesn’t actually dictate when you have the option to retire.

For those who aren’t dependent on Social Security income, it could be possible to retire in your 50’s, 40’s and even 30’s when you have accrued large enough savings. One important thing that you should be aware of is that car insurance rates are tied to your age. Since both young inexperienced drivers and elderly drivers are seen to be high-risk classes, it’s very important that you consider your retirement planning and how old you’ll be before you budget.

How does your age impact your rates?

If you’re like many Americans who plan to wait until full retirement before you call it quits on the day job, your age could negatively drive rates up. Unfortunately, this happens regardless of your employment status. While teens between 16 and 17 are charged the highest age-based base rate for coverage, seniors about 69 aren’t far behind.

If you’re lucky enough to retire while you’re still young, age-based rates won’t have a big impact on your risk class and you’ll reap the benefits in a change of usage and mileage. You can balance out this high base rate for your age if you wait by taking advantage of special discounts that only seniors quality for like Daytime Driving or Mature Driver Training.

When Vehicle Usage Can Drive Rates Down

All insurance experts recommend that anyone who has a change in employment status should call their agent to notify them of that change. This not only protects you if you need to file a claim, it can qualify you for discounts in your rating as well. There are 3 different types of usage classes that can be assigned to a vehicle that you drive. Here are how they stack up against each other:

  • Pleasure: lowest-priced risk class for those who do not drive to work or school
  • Commute: mid-priced risk class for drivers commuting to one location
  • Business: high-priced class for business drivers who go to multiple locations

If you’re employed and drive to and from work or work sites you’ll be rated with either the commuter or business user classification. Since pleasure usage is the lowest-priced class, changing usage from commute or business to pleasure will lower annual premiums. The biggest drop will be if you go from business to pleasure because of the dramatic shift in risk.

How Your Annual Mileage Can Impact Your Auto Insurance Premiums

Another area of your insurance you’ll need to address at retirement is your annual mileage estimates. When you apply for coverage, you’ll be asked just how much you drive either weekly, monthly or annually. Then, the company does the math to estimate how much that tallies up to for the year.

If you drive less than 5000 miles, most companies give a low-mileage discount.

Those who commute to work often drive more than those who only drive to run errands. If your driving significantly less, you might be able to give your company an odometer reading and lower your mileage for the remainder of the term.

When you don’t have employment income coming in regularly, you need to assess your expenses and find areas where you can save. This is why you should assess the coverage options that you need and lower them where appropriate. You can’t ditch insurance entirely, but you can look for savings at every turn by comparison shopping with smart online tools that’ll give you access to rate quotes with several different insurers. Start comparing car insurance rates now by entering your zip code in our FREE tool below!

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