Auto insurance: what's involved and how to save money

There are several factors that determine your auto insurance rates. Knowing which ones affect you can help you manage your premiums.

What makes your auto insurance rate fluctuate?

Rates for all types of insurance are based on the same principle: the higher the risk and the cost of settling claims, the higher the premium. How we calculate your rate depends on several factors, including:

  • What car you drive: Some cars are more expensive to repair or more likely to be stolen than others. Before you buy or lease your next vehicle, check the Canadian Loss Experience Automobile Rating (CLEAR) to see how your car measures up.
  • Where you drive: Generally, city drivers are more likely to be involved in accidents than non-city drivers due to the higher volume of vehicles sharing city roads. Some neighbourhoods also experience more car theft than others.
  • How much you drive: The more you use your car, the more likely you are to have an accident.
  • Your driving and claims records: The better your driving record, the lower your premium will be. People who have had a lot of accidents, speeding tickets or insurance claims in the past tend to continue making them in the future, which increases their risk. Your first minor conviction will typically have little or no impact on your rates; however, 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 at-fault over the last six years, or a number of minor driving convictions or even one major or serious conviction over the last three years, your premium will be higher.
  • Your driving experience: Experienced drivers with clean records enjoy better rates. Accidents involving younger drivers between 16 and 25 tend to be more frequent and more serious.
  • Amount of coverage you purchase: Many people buy additional protection beyond the mandatory coverage. For an additional cost, Collision coverage protects you for damage to your vehicle regardless of who caused the accident, and Comprehensive coverage protects you against theft, vandalism, hail, or explosion. There are also other options, such as increasing your Third-Party Liability protection or increasing your deductibles. 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.
  • Your deductible: Your deductible is the portion of a loss that you are required to pay. A higher deductible means that you pay more towards the cost of repairing your vehicle, while The Co-operators pays less toward the total cost of repair. As a result, your premium will be lower. 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.
    If you prefer to 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. Keep in mind, however, that since Collision or Upset and Comprehensive are both optional coverages, your insurance company may require you to carry higher deductibles if you have had a lot of prior claims.

In addition to these specific considerations, there are many broader factors that affect insurance rates, including government regulation, taxes, health care costs, increased court awards, towing fees, repair costs, and insurance fraud.

How to save money on your auto insurance

You may be surprised by how easy it is to start saving money on your auto insurance. Now is the perfect time to make sure you have the right coverage for your needs, at the best rate.

  • Build a good driving history free of accidents and convictions. This means driving carefully and obeying the rules of the road. Wear your seat belt and don’t use your cell phone while driving. Don’t drink and drive.
  • Have a plan. Speak with a financial advisor, who will help to determine the amount of coverage you need. This will allow you to plan ahead for the unexpected.
  • Compare apples with apples. When comparing quotes, consider not only the premium, but also what you’ll get for your money, such as the amount of coverage, the claims service provided and the types of losses covered by the policy.
  • Consider increasing your deductible. A deductible is the amount you agree to pay toward the total amount of the loss: your share of the claim. The higher your deductible, the lower your premium.
  • Ask about discounts. Look for discounts for insuring more than one vehicle, purchasing more than one type of insurance from the same company, installing safety features, taking driver’s training, and being a retiree.
  • Don't pay for coverage you don't need. For example, it may not be cost effective to have Collision or Upset and/or Comprehensive coverages on a vehicle that is worth less than $1,000, because any claim you make would not substantially exceed your deductible or the annual premium. 
  • Consider insurance costs when buying a vehicle. Before you buy a new vehicle, refer to the Insurance Bureau of Canada’s “How Cars Measure Up” tool, which compares vehicles in terms of their relative insurance costs and their safety features. For example, if you buy a vehicle with a high theft rate, your premium will be higher. Choose a vehicle with good security features.
  • Pay your premium on time. If you pay your premium by cheque or through automatic withdrawals from your bank account, make sure you always have enough money to cover your payment. If your insurance company is unable to withdraw your payment because you do not have enough money in the account, it could result in the cancellation of your auto insurance policy. If your policy is cancelled for non-payment on various occasions, many companies may consider you a higher risk, and you could pay much more for your auto insurance. Also, if you've had your insurance policy cancelled more than once during a certain period of time due to insufficient funds, insurance companies are not required to offer the option of monthly premium payments.

Tips for young drivers

As a young driver, here are a few tips on getting the best rate for you:

  • Take a driver-training course that is recognized by your insurance company.
  • Consider gaining experience as a named occasional driver under the insurance policy of a parent or guardian, rather than as a principal driver of your own vehicle. Premiums for young, occasional drivers are much lower than premiums for young, principal drivers.

As a young driver, building a good driving record free of at-fault accidents and driving convictions is the best way to ensure low future premiums. 

If you have questions about your premiums, or think you might be buying too much or too little insurance, speak to your local Co-operators financial advisor. They can help you manage your auto insurance costs and make sure you have the coverage you need at a price you can afford.