March 24, 2022

Biggest Auto Insurance Myths: Part 3

What the data says about car accidents and older adults

Finding reliable information about car insurance can be difficult in a world with silly commercials and spammy websites. People may wonder if car insurance is really more expensive for older adults and in no-fault states, or if they can deduct auto insurance from their taxes. Since 48 states require car insurance, you must purchase a policy, but that doesn’t mean you should skimp on your research before doing so. Here, we address three of the most common myths about car insurance, using raw data to get you objective answers.

Is Car Insurance More Expensive for Older Adults?

There’s a stereotype that older adults get into accidents more often, leading insurers to give them higher auto insurance premiums to account for this risk.

The Belief

Older people cost more to insure and thus have higher car insurance rates, regardless of their credit histories, driving records, vehicles’ safety features, etc.

The Verdict

Older adults do pay more for car insurance than those ages 25 to 75 (or 60 in some cases).

The Details

Auto insurance premiums increase after people turn anywhere from age 60 to 75, according to senior driving statistics. Progressive released its average rates by age, which increase when people turn 75.

Age group Average rate Year-over-year change
17 and under $206 N/A
18 $230 10%
19-20 $203 -13%
21-22 $176 -15%
23-24 $153 -15%
25-29 $136 -13%
30-34 $127 -7%
35-39 $124 -2%
40-44 $122 -2%
45-49 $120 -2%
50-54 $111 -8%
55-64 $100 -11%
65-74 $96 -4%
75 and over $101 5%

“Your age certainly plays a factor in your auto insurance rate,” said Kevin Hamill, an insurance agent and partner at Quantum Assurance. “Generally, insurance carriers will start applying senior rates around age 65, and they will continue to increase until age 100.”

Why do car insurance companies charge older adults more for the same coverage? Because those 65 and older are 23 percent more likely to die in a traffic accident than any other age group, according to the National Safety Council.

Age group Motor vehicle death rate in the U.S. in 2019 Average Percentage higher than the rest of the U.S. population
All ages 12 12 -1%
Younger than 5 2 12 -445%
5-14 2 12 -471%
15-24 14 12 15%
25-44 14 12 14%
45-64 13 12 10%
65-74 13 12 8%
75 and older 19 12 38%2

Other data from the Insurance Institute for Highway Safety indicated that fatal crash rates increase around ages 70 to 74 and peak among those 85 and older.

Age group Motor vehicle crash deaths per 100,000 people in 2019
Younger than 16 2
16-19 12
20-24 17
25-29 15
30-34 13
35-39 13
40-44 12
45-49 12
50-54 13
55-59 13
60-64 12
65-69 12
70-74 12
75-79 14
80-84 17
85 and older 17

That said, although older adults are more susceptible to death and injuries following crashes, especially chest injuries, they’re actually less likely to get into crashes than any other age group. 3

Age group Rate of drivers in all crashes per 100,000 drivers Percent difference from national average for all crashes
16 26,342 45%
17 22,422 35%
18 22,582 36%
19 20,473 29%
16-19 22,103 34%
20 17,364 17%
21 16,814 14%
22 15,821 8%
23 15,196 5%
24 14,339 -1%
20-24 15,876 9%
25-34 11,941 -21%
35-44 9,062 -60%
45-54 7,776 -86%
55-64 6,187 -134%
65-74 4,383 -231%
75 and above 3,369 -330%

Those 75 and older are actually 330 percent less likely to get into a crash than the average across all age groups, according to data from the National Safety Council.

So it’s a misconception that older adults are bad drivers, but they are more likely to have medical complications and even die from car accidents. Anticipating the high medical bills, insurers charge older adults more for personal auto insurance, including liability, comprehensive, and collision coverage.

While auto insurance premiums for older adults may be higher, there are ways to lower them through senior discounts. Learn more about car insurance for seniors in Florida and car insurance for seniors in Michigan, two of the most expensive states for car insurance.

Is Car Insurance More Expensive in No-Fault States?

Every state has a fault system for car insurance. In no-fault states like Florida, the party that caused an accident would only be responsible for the other party’s property damages; each party would pay for their own bodily injuries under personal injury protection (PIP) coverage. Unlike in no-fault states, the party at fault for the accident is responsible for the other party’s injuries and property damages in at-fault states. But does the fault system affect the cost of car insurance?

The Belief

Car insurance is more expensive in no-fault states.

The Verdict

The rumors are true: Car insurance is more expensive in no-fault states, which is why no-fault states have become relatively rare in the U.S.

DID YOU KNOW?

Delaware, Florida, Hawaii, Kansas, Massachusetts, Minnesota, New York, North Dakota, Texas, Utah, and Washington are the only no-fault states. In Kentucky, New Jersey, and Pennsylvania, drivers can choose either system.

The Details

“Since some states do not require you to carry PIP on your policy, the states that do require you to carry PIP are typically more expensive to insure in,” Hamill said. As of the most recent data from the National Association of Insurance Commissioners, car insurance costs an average of 7 percent more in states with no-fault or optional no-fault insurance systems versus at-fault systems.

Fault system Average spending on car insurance in 2019
At-fault $989.73
No-fault $1,054.13
Optional $1,107.824

When no-fault insurance was first conceived in the 1970s, it was thought of as a way to decrease both court costs and premiums. If each party were responsible for their own medical costs, there would be fewer personal injury lawsuits and thus lower car insurance costs, the thinking went. However, no-fault insurance had unintended consequences: more fraudulent claims and higher car insurance costs.5

According to the Insurance Information Institute, having a specific dollar amount for PIP leads to more fraudulent claims. Dishonest medical providers file fake insurance claims and then sue insurers who challenge those claims, leading car insurance providers to pass on the cost of those lawsuits to the consumers.6

Is Car Insurance Tax Deductible?

People scramble through their records during tax season, looking for possible deductions. Ah, there’s that car insurance policy declarations page — can you deduct car insurance from your taxes?

The Belief

You can deduct car insurance from your taxes, whether you used your car for business or pleasure.

The Verdict

Actually, car insurance is only tax deductible if you use your car for business purposes, which doesn’t include commuting to and from work. If you used your car for personal needs, your insurance is not deductible. But you may be able to deduct losses if you experienced auto theft or your car was declared a total loss.

The Details

If you used your car for activities like visiting clients, driving to business conferences, or delivering work supplies, you could deduct your insurance and other auto-related costs from your tax return. Whether you are self-employed or work for a company, you can deduct car insurance along with these items:

  • Car repairs
  • Depreciation
  • Gas
  • Lease payments
  • License fees
  • Oil
  • Registration fees
  • Rent to park in garages
  • Tires
  • Tolling and parking fees (but only instead of car insurance premiums)
  • Mileage (but only instead of car insurance premiums; deduction of 56 cents per mile for standard mileage in 2021)

For you to deduct these auto-related costs, they must be more than 2 percent of your adjusted gross income (that is, your gross income minus adjustments like student loan interest and alimony payments)7. If the auto costs are less than 2 percent, you can’t deduct them on your tax return.

NOTE

Car insurance is also tax deductible for qualified performing artists, armed forces reservists traveling up to 100 miles away from home, and fee-based local and state government officials.

Essentially, the only time you can’t deduct auto-related costs from your tax return is if you only use your car for pleasure and/or commuting. But there is one exception: if you were a victim of auto burglary or your car was deemed a total loss. In those cases, you must meet the following criteria to qualify for a deduction:

  • You filed a claim with your insurer.
  • You weren’t negligent at all in the accident.
  • You didn’t get completely reimbursed for your loss, even if you had comprehensive insurance that covers car theft.
  • Your losses were over $100 and more than 10 percent of your adjusted gross income.8

If that sounds complicated, talk to your accountant about whether you can and how to deduct car insurance from your taxes.

To read more of our auto insurance research, see our previous installments in this series: The Biggest Auto Insurance Myths and Biggest Auto Insurance Myths: Part 2. We answer questions like, “Do men pay more for car insurance?”, “Will an accident or speeding ticket make your rates go up?”, and “Do red cars cost more to insure?”

Of course, if you have specific questions about your car insurance policy, it’s best to check with your insurance agent directly.

About Our Data

We conducted an interview with Kevin Hamill, a car insurance agent and partner at Quantum Assurance, on March 22, 2022. To complement our interview, we included third-party data from the following organizations:

  • Insurance Information Institute
  • Insurance Institute for Highway Safety
  • Internal Revenue Service
  • National Association of Insurance Commissioners
  • National Safety Council
  • Nationwide
  • Progressive
  • RAND Corporation

Citations

  1. At what age does car insurance go down? Progressive. (2022).
    https://www.progressive.com/answers/how-age-impacts-insurance/

  2. HISTORICAL FATALITY TRENDS. NSC. (2022).
    https://injuryfacts.nsc.org/motor-vehicle/historical-fatality-trends/deaths-by-age-group/

  3. Fatality Facts 2019. IIHS. https://www.iihs.org/topics/fatality-statistics/detail/older-people#fn2

  4. 2018/2019 Auto Insurance Database Report. NAIC. (2022). https://content.naic.org/sites/default/files/publication-aut-pb-auto-insurance-database.pdf

  5. The U.S. Experience with No-Fault Automobile Insurance. Rand Corporation. (2022). https://www.rand.org/pubs/monographs/MG860.html

  6. Background on: No-fault auto insurance. III. (2022). https://www.iii.org/article/background-on-no-fault-auto-insurance

  7. Definition of Adjusted Gross Income. IRS. (2022, Jan). https://www.irs.gov/e-file-providers/definition-of-adjusted-gross-income

  8. Find out if your car insurance is tax deductible. Nationwide. https://www.nationwide.com/lc/resources/auto-insurance/articles/is-auto-insurance-tax-deductible