Rates for all types of insurance are based on the same principle: the higher the risk and the cost to settle claims, the higher the premium. How insurance companies calculate your rate depends on these factors. Knowing which ones affect you can help you save on car insurance.
The type of car you drive
Some cars are more expensive to repair or are stolen more often than others.
- Saving tip: Consider insurance costs when you buy a vehicle. Refer to the Canadian Loss Experience Automobile Rating (CLEAR), which compares insurance costs and safety features for different makes and models. Choosing a vehicle with a lower theft rate and good security and safety features may lower your premium.
How much and where you drive
The more you use your car, the higher your collision risk. City drivers or regular commuters are more likely to have a collision due to a higher volume of vehicles on the road.
- Saving tip: Whenever possible, take public transit or carpool to work. If you make this part of your regular routine, you’ll lower your premium and spend less on gas, parking, vehicle maintenance and other costs associated with driving to work.
Your driving and claims records
Drivers with lots of accidents, speeding tickets or insurance claims on their record are considered higher risk. One minor conviction typically has little or no impact on your premium; however, a second minor conviction in a three-year period may increase your rates. You may also pay more if you have multiple at-fault collisions in the last six years, or one serious conviction in the last three years.
- Saving tip: Build a good driving history. Reduce the chances of a collision by driving carefully and obeying the road rules. Here are three simple ways to improve your safety behind the wheel and cut driving costs.
Your age and driving experience
Collisions with younger drivers between ages 16 and 25 tend to be more frequent and serious. That’s why experienced drivers with clean records often pay lower premiums.
- Saving tip: Young drivers can build experience as a “named” or “occasional” driver under a parent or guardian’s policy, rather than as a principal driver of their own car. Premiums for occasional drivers are lower than principal drivers. Young drivers may also be eligible for a reduced rate if they take an approved driver training course that’s recognized by their insurance company.
What coverage you purchase
Beyond the mandatory coverage, most drivers buy Collision and Comprehensive coverage. You can also increase your Third-party Liability protection.
- Saving tip: Don't pay for coverage you don't need. For example, it may not be cost effective to have Collision or Comprehensive coverage on a vehicle that’s worth less than $1,000. Speak with a Financial Advisor* to help determine the right amount of coverage.
Your deductible is the portion of a loss that you are required to pay.
- Saving tip: Increase your deductible. A higher deductible means you pay more towards the repair cost, while your insurance company pays less. As a result, your premium is lower.
Other ways to save
Other factors can affect insurance rates, including government regulation, taxes, health care costs, increased court awards, towing fees, repair costs, and insurance fraud. Here are some other tips to save on car insurance.
- Compare quotes from difference companies**. Consider not only the premium, but also what you’ll get for your money, such as the amount of coverage, the claims service and the types of losses covered.
- Ask about discounts. You may be eligible for discounts for insuring multiple vehicles, purchasing more than one type of insurance from the same company, installing winter tires or being a retiree.
- Pay your premium on time. If you pay your premium by cheque or through automatic withdrawals from your bank account, make sure you have enough money to cover your payment. If your insurance company can’t withdraw your payment, they may cancel your policy and consider you a higher risk to insure in the future – meaning it will cost you more.
If you have questions about your premiums, or think you have too much or too little insurance, speak to a 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.
*Auto insurance is not available in all provinces.
**If you live in British Columbia, Saskatchewan or Manitoba, your provincial government requires basic auto insurance that covers injury to yourself and passengers. Additional coverage is available from your insurer.