It’s important for anyone with a car to understand how their auto insurance premium is calculated. There are a number of factors that go into determining an auto insurance premium, and those can mean the difference between an expensive premium and a cheaper one.
It’s also important to remember that coverage mandates can differ depending on the province that you live in. For example, auto insurance in British Columbia is obtained through a government program, rather than a private insurance company like Federated.
5 factors that influence your car insurance premium
Factor #1: The type of car you drive
The type of car you’re insuring is a key factor in determining your premium. The make, model, and year of your automobile can tell an insurer a lot about the risk involved. Insurance companies track information and collect claims data on theft, collisions, other claims, and the cost of repair and replacement parts. The cars found to have higher instances of theft and collisions, or more expensive replacement parts, will likely cost more to insure. To see if your car is one of the most commonly stolen vehicles in Canada, check out the Insurance Bureau of Canada’s list of the cars most often stolen in 2017.
Factor #2: Where you live
Insurance companies also track claims data by geography, and that’s taken into consideration when putting together your policy and determining your premium. Every city is different, but generally busy urban areas present more risks than less populated rural areas. Cities that historically have higher incidents of theft, collisions, and fraud can cause premium costs to increase for insured drivers within that region. Rates can also differ from neighbourhood to neighbourhood within the same city.
Factor #3: How much you drive
Your insurance company will ask you a number of questions before your premium is determined. Naturally, the more time drivers spend on the road, the more they’re at risk for collisions. Because of this, you’ll be asked how long your daily commute is and approximately how many kilometers a year you drive. They’ll also ask you whether you’re driving for personal reasons or for work. This will help them determine if you need a personal auto insurance policy, or a commercial one.
Factor #4: Your driving history
This is one of the most important factors, and it’s actually the one you have the most control over! Drivers with a history of driving safely and responsibly will likely have lower insurance premiums than other drivers. This means having minimal claims history with your insurer and a clean driving record. But drivers with a history of insurance claims, accidents, or traffic tickets will likely find their monthly insurance premiums are impacted. Higher-risk drivers typically have to pay higher rates for insurance coverage.
Drivers with minimal claims history with their insurer and a clean driving record will generally have lower insurance premiums than other drivers.
On top of your driving history, insurance companies will ask about your age, how long you’ve had a license, and whether or not you’re retired. The longer you’ve been driving, especially with a clean record, the more likely it is that you’ll get lower rates.
Factor #5: Your coverages and deductible
Car insurance policies differ. While basic auto insurance includes liability insurance since it’s mandatory in Canada, there are also a number of protections that many drivers choose to add to their policy. That way, if you’re involved in an accident and your car is damaged, you have the support you need.
Collision insurance and comprehensive insurance coverages are popular additions to auto insurance policies. The types of coverage and the amount of coverage you choose will affect your premium. You can also adjust the deductible amount for your car insurance coverage. Your deductible is the amount of the claim that you agree to pay out of pocket before your insurer pays their part. Those who choose to have the lowest deductible amount available will likely have higher insurance premiums.
Auto insurance can be complicated as rates, coverages, and providers can vary depending on the province. Understanding the different factors that affect your car insurance premium is a good step toward choosing the right insurance for you. For more information, visit our auto insurance page and find out how Federated can help you!
This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.