Your auto insurance rates are determined by a combination of factors including:
- Your Personal Profile
- The Amount of Coverage You Purchase
- Your Deductible
- The Insurance Company You Choose
1. Your Personal Profile
The type of vehicle you drive: Many insurance companies rate makes and models of vehicles according to their actual claims experience, such as the cost of repairs, the rate of injury, and the likelihood that a particular vehicle may be stolen or involved in an accident.
Your driving record: The premium you pay also depends on your driving record. This includes accidents where you are more than 25 per cent at-fault1, the length of time you have been licensed to drive, whether or not you have taken a driver-training course that your insurance company recognizes, and driving convictions (such as: speeding and impaired or careless driving).
Generally, your first minor conviction will have little or no impact on your rates. But if you have had a second minor conviction in the last three years, it will most likely affect your premium. If you have had accidents where you are more than 25 per cent at-fault over the last six years2, or a number of minor driving convictions or even one major or serious conviction over the last three years, your premium will be higher. Likewise, the better your driving record, the lower your premium will be.
How much you drive: Your auto insurance premium will also be affected by how much you drive. This is because the more time you spend on the road, the higher the chances of becoming involved in an accident. In urban areas, driving to work may include driving to a subway, bus, or train station. If you live close to work, you will probably have a lower premium than someone who lives far from work or who needs to use his or her vehicle for business.
Where you live: Auto insurance rates are generally higher in larger urban centres. This is because there are a greater number of vehicles on the road, and the chances of getting into an accident are higher. Also, more vehicles are stolen in urban areas.
Your age: In general, mature drivers have fewer accidents than younger drivers, particularly teenagers. Drivers who are 25 years of age and over can generally buy insurance at a considerably lower cost than younger drivers.
2. The Amount of Coverage You Purchase
Many people buy additional protection beyond the mandatory coverage. For example, if you buy optional Collision Coverage, which protects you for damage to your vehicle regardless of who caused the accident, or Comprehensive Coverage, which protects you against theft, vandalism, hail, or explosion, your vehicle will, be covered against any such incidences, but you will pay more.
There are also other options, such as increasing your Third-Party Liability protection or increasing your Standard Accident Benefits Coverage. These options give you more choice and flexibility over your coverages that will allow you to customize your policy to better suit your needs. All of these optional coverages will have an effect on the cost of your policy.
Discuss your options and costs with your agent or broker.
3. Your Deductible
Your deductible is the portion of a loss that you are required to pay. Your deductible can vary, depending on the type of coverage you have and the percentage of fault you are assigned in the event of an accident. There are deductibles for Collision or Upset, Comprehensive, All Perils, and Specified Perils Coverages.
You can also pay a lower premium by having a deductible on Direct Compensation-Property Damage (DC-PD) Coverage or raising the deductible on the other coverages.
For example, by having a higher deductible of $500, instead of $300, on Comprehensive Coverage, you can save about 10 per cent off your Comprehensive premium.
These savings are due to the fact that higher deductibles mean you pay more towards the cost of repairing your vehicle, while your insurance company pays less toward the total cost of repair. As a result, your premium will be lower.
If you’d rather have lower deductibles, you may be able to do so if you meet certain conditions and if your company offers them, but your premium will be higher. (Recognize, however, that since Collision or Upset and Comprehensive are both optional coverages, your insurance company may obligate you to carry higher deductibles if you have had a lot of prior claims.)
If you have an older vehicle, you may choose to reduce your premium further by dropping Collision or Upset and Comprehensive Coverages entirely.
4. The Insurance Company You Choose
Auto insurance premiums for the exact same coverage can vary substantially from insurance company to insurance company.
Why?
Financial factors unique to each insurance company will contribute to the amount each company will charge you for auto insurance. This is why it is important to shop around!
Insurance works according to a “pooling” concept. You are one member of the risk group in the company you select as your insurer. Your company charges premiums based on the claims experience of the entire group. If an insurance company’s claims experience for a particular risk group is significantly higher than another insurance company’s, its insurance premiums will be higher.