Auto insurance companies use several pricing factors when setting auto insurance premiums. Here are the most common considerations:
Record your driving
Your driving record is one of the biggest factors in determining your car insurance premium. Driving history includes your history of at-fault car accidents, traffic violations such as speeding tickets, license suspensions and even parking tickets.
Drivers who have had recent at-fault accidents and major traffic violations will pay more for coverage than good drivers. When setting auto insurance rates, your insurance company can review the last three to five years of your driving record, depending on your county and insurance company. According to the Insurance Bureau of Canada, it can take up to six years for your record to be considered clean again by insurance companies.
Your car insurance rates will go up after a speeding ticket. You can also expect auto insurance rates to increase after an accident if you are at fault.
Your auto insurance coverage choices
The coverage you choose is also a major factor in determining auto insurance rates. In Canada, there are mandatory and optional types of insurance. Compulsory insurance includes third party liability and accident benefits, and each province sets a minimum coverage amount for each. For example, in Ontario the minimum third party liability is $200,000, while Nova Scotia sets the minimum at $500,000. However, you can choose higher coverage, which in turn will increase your monthly premium.
Don’t skimp on getting only the coverage you need to save money. This mistake could end up costing you more in the long run.
For example, your county’s minimum auto insurance requirement may not be sufficient. If you cause a car accident with multiple injuries, you can quickly deplete the policy limit, which means you’ll be stuck paying other people’s medical expenses and other bills out of pocket. In general, you want to buy enough liability insurance to cover what you might lose in a lawsuit, such as your savings.
There is also optional coverage for loss and damage, including comprehensive, collision or upset, and all specified perils and perils. Talk to your insurance company about whether this coverage is right for you.
Discount your car insurance
The car insurance deductible is the amount you are responsible for when making a claim. It’s usually deducted from your insurance check, or you may need to pay the mechanic directly when you pick up your car after it’s been repaired. For example, if your car repair estimate is $2,000 and you have a $500 deductible, you would get an insurance check for $1,500.
In general, the higher the deductible, the less you will have to pay in auto insurance premiums. This is because your insurance company will pay less if you file a claim.
Not all coverage carries a deductible. For example, there is no auto insurance deduction for third party liability benefits and accident benefits.
The type of vehicle you drive
The make and model of your car is another pricing factor for car insurance. Your insurance company looks at past claims from similar forms to assess repair costs, advance payments for comprehensive claims, and theft rates.
Your age and driving experience
Young and inexperienced drivers will pay more for car insurance because they are more likely to get into a car accident. Auto insurance rates for young drivers begin to decline around the age of 25. You tend to enjoy the best rates in your 40s and 50s, but your rates start to rise again at 70 and older.
Where do you live
Your zip code is another important pricing factor. Drivers who live in cities usually pay more than drivers in the suburbs due to higher rates of car accidents, theft, and vandalism. The insurance company also considers claims related to the weather in your area, such as hail or flooding.
Other factors related to location include:
- The cost of medical care.
- Car repair costs.
- Frequent car accident and fraud claims.
your driving habits
The amount you drive each day and the annual mileage will also affect your driving premium. For example, all things being equal, a driver who commutes 50 kilometers one way to work each day will pay more than someone who works from home.
your balance
Auto insurance companies may consider a credit-based insurance score to help determine your rates in counties where this is permitted. Alberta, Ontario, and Newfoundland and Labrador prohibit the use of credit in setting auto insurance rates.
Other auto insurance pricing factors
Auto insurers also often consider non-driving factors when setting rates, such as:
- Employment (retirees may qualify for a discount)
- marital status
- sex
The use of non-driving factors for auto insurance rates is controversial. Some consumer advocacy groups have raised concerns that the practice is inherently discriminatory.