Insurance companies use different algorithms and calculations to figure out how much your auto insurance should cost. And while understanding the individual nuts and bolts of the calculation may be difficult (and more than a blog can dissect), understanding what those calculations are based on and how you can save money is a lot easier to handle.
Your auto insurance premium is essentially based on five factors:
1. Vehicle Model
The make, model, and year of your car is a major factor in determining your insurance premium. All vehicles have an insurance rating through the Insurance Bureau of Canada. The ratings are determined by how safe your vehicle is, how much it costs to repair, and how likely it is to be stolen. Insurers use a system called CLEAR (Canadian Loss Experience Automobile Rating) to asses your car’s risk of needing a claim. Buying a vehicle with a lower-cost insurance rating and a good safety rating according to the Insurance Institute for Highway Safety will help save you money on your car insurance.
2. Driving Record
Your driving record will affect your car insurance premiums: there are no ifs, ands, or buts about it. License suspensions, parking tickets, driving convictions (speeding tickets, distracted or impaired driving charges, etc.), and at-fault accidents will all cause your insurance to go up. Some offenses stay on your insurance record for up to 6 years. The safer a driver you are, the lower your insurance premium will be.
3. Driving Experience
How long you’ve been driving will also affect your premium; the more experienced a driver you are, the better. That’s why insuring your teenager can sometimes cost an arm and a leg. Those over the age of 25 usually have lower premiums because they have more experience and more maturity.
4. Use of Vehicle
If you’re a commuter, unfortunately your rates are higher than someone who only drives occasionally and for limited distances. The higher your annual kilometers, the more you pay. With farther distances comes more opportunities for accidents and thus a higher likelihood of a claim.
Believe it or not, where you live plays an important factor in determining your auto insurance premium. Being in a high density urban location, a.k.a. the city, will increase your insurance premium. The more drivers in an area, the more opportunity for collisions. Living in a rural setting means less people which means less risk.
If anything has changed in your lifestyle with regards to any of these factors, make sure you contact your broker. Also, if you haven’t looked in to your policy lately, it’s a good idea to contact your broker. They can shop around for you and see if there’s a better deal available for your car insurance.