Factors that Affect Your Car Insurance Premium

Have you ever wondered why the cost of car insurance varies so much from driver to driver? The cost of coverage isn’t random - insurance providers assess several factors to determine how much risk you pose as a driver. Some of these factors are within your control, while others are not. Understanding how these key factors impact your rates can help you make informed choices when shopping for auto insurance and potentially lead to lower insurance costs. In this blog, we highlight some of the different factors that insurers consider when calculating your premium. Keep reading to learn more!

Please Note: This blog provides a general overview of factors that affect car insurance rates in Canada. It is not all-encompassing and should not be taken as specific advice. Factors may differ by location due to varying provincial regulations. Be sure to discuss your unique circumstances with a licenced insurance broker to receive guidance tailored to your situation.

Address

Where you live has a significant impact on your car insurance premium. When requesting car insurance quotes, insurers will use your postal code and review claims data, local traffic, the frequency of accidents, and levels of theft and vandalism in your neighbourhood to determine the amount of risk associated with insuring you. 

Due to higher population densities, drivers who live in urban centres are often exposed to greater risk, which can result in them paying more than those who live in rural areas. If you move to a different province or even a different neighbourhood within your city, you may see a change in your premium.

Driving Record & Insurance History

The length of time you have been licenced plays a role in determining your rate. New drivers, or those with limited driving experience, often face higher premiums due to the lack of an established track record. Drivers who are able to keep their records free of any at-fault accidents or traffic violations can typically benefit from lower premiums. Conversely, drivers who have a history of speeding tickets, at-fault accidents, or infractions may face higher costs. Safe driving habits, such as avoiding distractions, obeying the speed limit, and being aware of your surroundings, can help you avoid incidents and maintain a favourable record. 

Your claims history is another key factor. A history of frequent claims, especially those where you are at fault, may lead to higher premiums. A clean, claims-free record can demonstrate responsible driving and may qualify you for discounts or preferred rates. Of course, no one is perfect, and mishaps do occur from time to time. In these instances, having accident forgiveness coverage may prevent your first at-fault accident from impacting your rate. Ask a broker to learn more.

The Type of Car You Drive

Not all vehicles are insured at the same rate. Factors such as the make, model, and year of your car play a role in determining your premium. For example, some vehicles may cost less to insure due to advanced safety features that help prevent collisions, for having anti-theft devices installed, or for having low replacement and repair costs. 

On the other hand, luxury brands, sports cars, vehicles with expensive replacement parts, or those that experience a high rate of theft can often cost more to insure. If you are considering buying a new car, make sure you request quotes for any vehicles you are interested in before making a final decision. This will help you better understand the costs associated with owning a certain car and allow you to make a purchase that falls within your budget.

Vehicle Usage

As a general rule of thumb, the more time you spend on the road, the more likely you are to be in an accident. If you have a long daily commute to work or frequently take long road trips, you’ll likely have a high annual mileage and may end up paying more for coverage. Additionally, using your vehicle for business purposes can also lead to higher rates due to an increased exposure to risk. However, if you only use your car on occasion or for short trips, you might qualify for lower premiums.

Some insurers offer user-based insurance (UBI), which leverages technology to track and reward safe driving behaviours, including distance travelled. Additionally, you can try using alternative methods of transportation, like taking the bus, ridesharing, carpooling, or walking, more often to see if that can help lower your rates. Either way, if you plan on driving less, let your broker know so you don’t miss out on any potential savings.

Personal Demographics

Certain personal details, such as age and gender, can impact your car insurance premium. Statistically, younger drivers are more likely to be involved in accidents due to a lack of driving experience, leading to higher rates. That said, once you have passed the age of 25, there is a good chance you will see your rates drop, provided you have a clean record.

You might see a bit of an increase when you reach your senior years; however, there are many discounts available that can help drivers in this age group save. Your gender can also play a role in your rates. Males, especially under the age of 25, tend to be in more serious collisions and engage in riskier driving behaviours compared to females and face higher premiums as a result.

The Coverage You Select

The type and amount of coverage you choose directly impacts your premium. While each province has mandatory coverage requirements, you can also opt for additional protections like collision insurance or comprehensive car insurance and various other endorsements. The more coverage included in your policy, the more you can expect to pay for your insurance.

Keep in mind that while adding these optional coverages to your policy means you pay more in the short term, having them can also save you far more down the road in the event you are in a serious accident. Reviewing your policy annually can help you adjust coverage based on your needs and budget.

Get Expert Advice From BIG

As you can see, auto insurance premiums are determined by a mix of personal and external factors. While many of these are simply out of your control, being a safe driver, choosing a vehicle wisely, asking about discounts, and selecting the right coverage can help keep your costs manageable. If you're wondering about any other factors that impact your rates or if you are looking for opportunities to reduce your premium, contact a BIG broker or request a quote for car insurance online today!