What Determines the Price of a Policy
The cost of insurance consists of the following components:
- The base rate, which depends on the risk perceived by the insurer selling the policy. When calculating the rate for auto insurance, the insurer takes a number of factors into account. The most important include: the model, make and age of the vehicle; where the vehicle is registered and used; what the vehicle is used for; the scope of coverage; and the form and frequency of premium payments. Another key factor affecting the price of the policy is how long the driver has been licensed and the driver’s age.
- A surcharge is a penalty charge for factors that increase the insurer’s risk and are under your control. A surcharge can result from traffic tickets, accidents you caused, penalties for late premium payments, lapses in coverage, or a poor credit score.
- Discounts are price reductions for positive driver behavior that lowers the insurer’s risk. Discounts are given for accident-free driving, safety equipment in the car, defensive driving courses, a teenager’s good grades in school and much more. You will pay less if you are a long-time customer or have a policy on a second car or a home with the same company.
Summary: Insurance premium = base rate + surcharges – discounts.
The Driver’s Age
The most dangerous drivers are those aged 20–25. The accident rate drops for middle-aged people, then begins to rise for those over seventy. Research by the Insurance Institute for Highway Safety (IIHS) confirms that per mile driven, drivers over seventy have a higher rate of fatal crashes than middle-aged drivers.
Seniors, although often experienced behind the wheel, suffer from deteriorating eyesight and ailments that can increase the risk of a road collision because of misjudged distances, difficulty dividing attention, slower reaction times, etc. Insurance companies know the statistics well, so they raise prices for older drivers.
Take Advantage of Discounts
Although the base price of auto insurance for retirees usually goes up, they may still be eligible for various discounts, just like younger people. In most cases, seniors will get even bigger discounts than newly licensed drivers. Many states’ laws provide discounts for defensive driving courses. For example, in New York State, completing an approved course (Point and Insurance Reduction Program) lowers the base insurance rate by 10% for three years.
Insurance companies are profit-driven, so don’t expect them to offer you a discount voluntarily. On the other hand, they are fighting the competition, so they will gladly give you a discount if you ask for it. A survey conducted by The Business Journal showed that four out of five customers never ask for discounts at all. Don’t make that mistake! Thanks to various discounts, you can lower your premium by tens or even hundreds of dollars a year.
Drive Less
If you have retired, tell your insurance company that you no longer commute to work. Depending on the state, the discount can range from zero to over ten percent. Most companies consider “low mileage” to be 5 to 7.5 thousand miles a year, and some more.
You will also be rewarded for accident-free driving. A long and clean driving record means that, in the insurance company’s eyes, the risk of insuring you is lower – so your premium can be lowered despite the advancing years.
Use the Pay-As-You-Drive Option
With a “pay as you drive” policy (also called PAYD), a device is installed in your car that records the number of miles driven and your driving style (speed, braking and acceleration). Your premium will depend on your driving style and the recorded mileage.
Many companies will immediately give you a 5–10 percent discount just for signing up for a PAYD program, until they set your rate based on the data collected. You will get an additional discount if your mileage is below the national average, which according to the Federal Highway Administration is about 13,500 miles a year per driver (for people over 65 – about 7,600 miles).
Take a Course
Take a defensive driving course. You can get a 5 to 15% discount for completing it, although the amount of the discount and eligibility for it depend on your age and state regulations. AARP (www.aarp.org) organizes safety courses for seniors, even online.
Equip Your Car
Equip your car with devices that improve driving safety: a dashcam, a trip recorder, a parking assist system, collision warning systems, etc.
A dashcam may come in handy for you in the event of an accident, to prove your innocence in court or in a fight with an insurer over compensation.
Join a Group
One of the biggest discounts you can get is for membership in the right organization. This is called an affinity discount. A person over fifty can join AARP (www.aarp.org) and buy a policy there at a favorable price. Current and former members of the US armed forces can take advantage of offers from USAA (www.usaa.com).
Stop Driving
There will come a time when it will be safer for you and others if you no longer get behind the wheel. USAA lists symptoms that suggest it is time: you get lost in a familiar area, numerous scrapes and scratches on the car body, near-accidents, slowed reflexes, difficulty reading and understanding road signs, difficulty judging speed, etc. Whenever other drivers honk at you – think about why.
Giving up driving is not the end of the world. Even if there is no public transportation in your area, taking a cab or an Uber occasionally is, all in all, cheaper than owning your own car.
Conclusion
Even as we get older, we can do a lot to avoid paying more and more. Ask for discounts, and if you don’t get them, go elsewhere.
Financial and consumer magazines publish rankings of insurers recommended for seniors every year, but prices depend on the driver’s age and ZIP code – which is why it always pays to compare several offers.
Get more information from your insurance agent.
Updated October 2026.
