Insure.com analysis: Percentage of income spent on auto insurance, by age group
From the time you're a teen with a new driver's license until your grown children decide that you're too old to drive, you're likely destined to pay for car insurance.
Unless you're using public transportation, or taking your chances hitchhiking, "You don't have any choice," says Lillian B. Rubin, a professor of sociology and the author of "60 on Up: The Truth About Aging in America."
Liability insurance can protect you from devastating financial losses if you injure other people or damage property. Optional coverage -- such as collision and comprehensive -- provide more protection. Insure.com's car insurance basics article offers an explanation of these choices.
To find out how much of your income is spent on car insurance throughout your life, Insure.com reviewed more than 185,000 car insurance quotes that were requested by users online and through our call center. We broke down the data into age ranges used by the federal Bureau of Labor Statistics, matching average car insurance prices with federal median wage figures. Here's what we found.
1. Ages 16-19: Teens take the biggest car insurance hit
The search for affordable car insurance can be frustrating when you have a teen on your policy. Parents dread the thought of seeing their car insurance rates soar almost as much as teenagers look forward to climbing behind the wheel.
According to Insure.com data, drivers age 16 to 19 pay an average of $2,923 per year for auto insurance. That's 15.5 percent of the annual median wage for the age group, which is $18,824. If you're a young driver -- or the parent of one -- that can mean a huge bite out of your wallet.
Economist Eric Tyson, author of the book "Let's Get Real About Money," observes that while teens generally are blessed with good health and quick reflexes, their lack of driving experience and relatively high accident rate make them a risk for insurers.
The AAA Foundation for Traffic Safety released a study about how distractions, such as the use of electronic devices, increase the chances of accidents for newly licensed teen drivers.
2. Ages 20-24: Young adults pay dearly for car insurance
With an annual median wage of just $24,076, drivers age 20 to 24 on average spend $1,994, just over 8 percent of their income, on auto insurance premiums. That's a big improvement over what they spent in their teen years, but still a hefty sum. Rubin notes that the recession has forced many people in this age group to continue living with their parents in order to make ends meet.
If they have access to reliable public transportation, some may be tempted to give up driving.
Tyson says the need for drivers in this group to buy car insurance often competes with the cost of paying for their higher education.
"They are finishing up college and beginning to enter the workforce," Tyson says. "Education is expensive and some kids spread it out over six or seven years. Spending pressures can mushroom if you end up starting a family at that age."
3. Ages 25-34: Starting to get a price break
Drivers age 25 to 34 begin to see some relief from the sky-high car insurance rates that younger drivers pay. On average they pay $1,553 annually for car insurance. That's 4.3 percent of a median income of $36,504.
According to Mary Reed, co-author of the book "Managing Debt for Dummies," these folks will have no problem finding ways to spend the money they save through lower car insurance premiums. The lingering recession has left many of them unemployed or underemployed. Young workers are struggling to pay for the health and retirement benefits that many employers have stopped providing.
"There is economic pressure from job loss or being stuck in contract labor positions" that don't offer full benefits, Reed explains. "No one is helping them fund their 401k or their health insurance. They are having to pay for things that, until recently, we expected employers to pay for."
4. Ages 35-44: Car insurance breaks are offset by rising expenses
Unless you have a poor driving record, when you hit the 35-to-44 age range you'll continue to see reductions in car insurance premiums. On average, these drivers spend 3.2 percent of their income on car insurance. That's $1,438 yearly, according to Insure.com data.
Insurance costs may be lower, but "the spending challenges are enormous" for these drivers, says Rubin. "They probably are feeding, clothing, housing and educating a couple of kids."
They also are struggling to maintain their standard of living. To make ends meet these days, most low- and middle-wage Americans "are giving up a lot of things," Rubin adds.
As your assets grow, so does your need for other types of insurance protection, says Tyson. It becomes increasingly important to have good home, health, life and auto insurance coverage to protect your growing assets.
Most people "need to have greater coverage for liability because their net worth is beginning to increase," he says.
5. Ages 45-54: Insurance bills compete with new demands for spending
Drivers age 45 to 54 pay $1,293 annually for auto insurance, on average. That's 2.8 percent of the annual median wage of $45,760. If that rate seems low, remember that as people approach and enter their 50s "a lot of them have the added pressure of dealing with aging parents," says Reed.
"In many cases, the income their parents thought they would have during retirement is not there," she adds. "Their investments are worthless. They cannot live on Social Security alone."
That means middle-aged people often must help their parents while still supporting their own children. Meanwhile, the recession has made people age 45 to 54 targets for layoffs in the workplace, as employers look to replace veteran employees with less expensive workers.
"People are living longer, so parents are more likely to become a burden," says Reed.
A 2011 study from MetLife found that nearly 10 million people age 50 and older are caring for aging parents in the U.S.
6. Ages 55-64: Insurance costs continue to drop
At age 55 to 64, drivers on average are paying just $1,174 or 2.5 percent of their annual wage for car insurance. Unfortunately, other financial pressures continue to mount for many. One of the biggest is saving for retirement.
"The people who were not saving at a younger age really have to get serious," says Tyson.
Those who started their families in their 30s and 40s may still have children in college or living at home. Some may have lost their jobs during the current recession, just as they reached their peak earning years.
Economists had anticipated a huge transfer in wealth when the baby boomers -- those born during the economic boom that followed World War II -- began inheriting their parents' wealth. The expected surge in affluence hasn't happened, however. Much of that wealth was eroded by falling stock prices and declining real estate values, says Reed.
7. Age 65 and over: Older drivers see insurance rates begin to rise
Although they remain comparatively good insurance risks, drivers age 65 and older often see a slight increase in insurance premiums. At an average of $1,201 annually, the cost of car insurance for this group typically amounts to 3 percent of $39,936, the annual median income.
While they are not as risky as teens or young adults, seniors are charged more, in part, because of the physical decline that comes with age, says Jim Whittle, assistant general counsel and chief claims counsel of the American Insurance Association. "It is important for insurance to reflect risk, to avoid situations where good drivers are underwriting folks who may have more challenges."
Even if you're getting on in years, your insurer likely will keep giving you comparatively low rates, as long as you have a clean driving record, says Peter Moraga, a spokesperson for the Insurance Information Network of California.
As old as you may get, it's unlikely that you'll ever be considered as risky as a teenager again.
"Your motor skills are going down, you are not as quick to react to emergencies, your eyesight may not be as good, or your hearing. But even a 70-year-old will not be as risky as a 16-year-old," Moraga says.