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How do Insurers Determine your Car Insurance Rates?

How do Insurers Determine your Car Insurance Rates?

To legally drive in Canada, you’ll need more than a valid driver’s license issued by the provincial or territorial government. By law, drivers are also required to obtain auto insurance.

Driver’s license fees are a fixed price, and a reasonably cheap one at that. But, Auto insurance can be quite expensive and often a long-term financial burden. Insurance providers study a few factors, such as age and driving record, and look into possible risks before calculating insurance fees.

Below, you’ll discover more about how car insurance rates are calculated and find out how to minimize your premium:

Quick Read:

Insurers check your driving record

Insurers look at your driving history first. If you’ve broken the rules a few times, expect a higher premium. And, if you’re a new driver, car insurance insurance providers will also take your inexperience into account.

If you’re a new driver, it’s a good idea to learn to drive as safely as possible. You could consider taking a defensive driving course to boost your skills and help lower your premium.

Drinking and driving will lead to a larger insurance fee

Never drink and drive. It’s life-threatening for you and everyone else. If you do come out unscathed, a Driving Under the Influence (DUI) charge comes with a hefty annual insurance fee. You may be required to pay over $10,000 on car insurance for a single year.

Driver’s age is a determining factor for car insurance premiums

Age is a fundamental factor affecting car insurance rates. Most insurers offer lower rates to drivers who are at least 25 years old, based on the assumption that drivers of this age are mature and experienced enough to drive safely. Depending on the service provider, senior citizens may be offered special discounts given that they’re still reliable behind the wheel.

Vehicle choice

Another factor affecting car insurance rates is your choice of vehicle. Sports cars or alternative vehicles will have higher insurance premiums compared to family vans.

Cars that are expensive and attractive often have powerful engines. They usually have low crash-test scores which mean higher insurance premiums. Owners may pay up to $10,000 a year.

It’s not really about how expensive vehicles are, but their likelihood of being involved in an accident. Opt for vehicles with high crash-test scores if you’re trying to save money on car insurance. And, don’t worry about the color – insurers won’t even consider it.

Driver’s neighbourhood is a factor too

Where you live also determines your insurance premium. Drivers who live near hazardous roads or frequently pass through them will see higher premiums due to the increased risk to their vehicle.

The same goes for drivers who live near risk-prone areas. Higher-density urban neighbourhoods are at higher risk of accidents and theft, says the Insurance Bureau of Canada. Living in these areas can increase your premium.

But, living in the suburbs won’t give you an advantage either. Those living in the suburbs may experience higher insurance rates based on annual mileage. Increased driving time also affects how car insurance rates are calculated. In fact, anyone who uses their car on a regular basis may face higher insurance rates.

Insurance bundles

If you want to save money, try bundling different insurance policies under a single provider.

For example, you can add your house, life, and motorcycle insurance policies to your car insurance premium, often leading to company discounts. Hire an insurance broker if you can. They know how car insurance rates are calculated and can access the best deals to help you get the most from your money.

Now that you’re familiar with how car insurance rates are calculated, you already know that rates can be as varied as the cars you see on the road. Opting for the right insurance policy can be challenging. There are tonnes of providers out there, and even more choices. To narrow down your search, visit CompareMyRates.ca, Canada’s first rate and price comparison website, and find the best, most affordable deals to suit your needs.