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What Affects Car Insurance Premiums?

What Affects Car Insurance Premiums?

Car insurance premiums can vary significantly depending on a number of important factors. Understanding what insurance companies look at when calculating your rate allows you to make smart choices that could potentially lower your costs. This article will explore the key elements that go into determining auto insurance premiums in Canada and provide tips on getting the best rate possible.


We’ll start by examining how your personal driver profile, including age, driving history and years licensed impacts your rate. Next, we’ll look at how attributes of your vehicle like make, model, safety features and repair costs contribute to premiums. We’ll also overview how your coverage choices, deductibles and additional options affect what you pay. Additionally, we’ll discuss how where you live factors into insurance rates. Finally, we’ll highlight some common discounts to ask about that could help lower your premium.


By the end, you’ll have a solid understanding of what goes into calculating car insurance rates in Canada. You’ll also gain helpful tips on comparing rates smartly to find the best value. With this knowledge, you’ll be well equipped to make choices that can minimize your insurance costs.

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Driver’s Age

Age is one of the most significant factors that impacts car insurance premiums in Canada. Insurance companies view younger drivers, especially those under 25, as higher risk and will charge much higher rates as a result. This is because statistically younger drivers are more likely to get into accidents due to lack of experience and a tendency to engage in riskier driving behaviors like speeding, distracted driving, and impaired driving.

For drivers under 25, insurance rates are often 2-3 times higher than those for drivers over 25. Rates start decreasing significantly once drivers reach their mid-twenties as they gain more experience behind the wheel. By the time drivers reach their thirties, rates decrease substantially. Older drivers over 55 tend to get the lowest insurance rates.

Insurers view young drivers as inexperienced and more prone to accidents, issuing higher premiums as a result. But as drivers get older, rates come down due to lower risk. Those with clean driving records can also qualify for additional good driver discounts to reduce rates further.

 

Driving Record

Your driving record is one of the most important factors that affects your car insurance premiums in Canada. Insurance companies will carefully examine your history of accidents, traffic violations and claims when calculating your rate.

Drivers with accidents and moving violations like speeding tickets, running red lights, reckless driving, or DUIs will see much higher rates. Each incident will typically increase your premium for 3-5 years until it falls off your record. Multiple violations or accidents within a short span will have an even greater impact on rates.

Insurers view drivers with past accidents and violations as higher risk and more likely to file a claim. Even a single speeding ticket can increase your premium 15-30% or more. Multiple incidents will result in exponentially higher costs. Too many violations may even result in policy cancellation.

At-fault accidents will impact your rates the most, especially if there was significant damage or injuries involved. You can expect a 40-50% rate hike or potentially more after an at-fault collision claim. Major accidents involving fatalities, DUI, or major property damage could increase premiums 100% or cause an insurer to deny coverage.

The number and dollar amount of claims you’ve filed will also impact pricing. Too many claims, even if you weren’t at fault, can signal high risk. Insurers may see multiple not-at-fault claims as suspicious or an indicator you drive in a way that increases accident risk.

Maintaining a clean driving record with no accidents, claims or violations is the best way to lock in lower premiums. Taking a defensive driving course can also offset some rate increases after an incident. But the impact of accidents and violations takes years to fade from your record and pricing.

 

Years Licensed

The number of years you’ve been licensed to drive will have a significant impact on your insurance premiums. Drivers who are new to the roads are considered higher risk by insurers. New drivers lack experience navigating different road conditions and reacting to unexpected situations. Their rates will be considerably higher as a result.

After the first few years of driving, rates tend to decrease as you gain more experience and establish a safe driving history. Most insurers offer the biggest rate drop after you’ve been licensed for around 5 years. Premiums continue to slowly decrease the longer you’ve held your license, up until around age 25 when rates level out.

So new drivers under 25 can expect to pay the highest rates. But maintaining a clean record avoids incidents that may further increase your premiums. Rates come down over time, so newer drivers should regularly compare quotes as they gain experience to find the best savings.

 

Annual Mileage

The number of kilometers you drive in a typical year is another key factor insurers consider. Drivers who rack up higher mileage have more exposure on the road over the course of a year, increasing their chances of being involved in an accident. Those who drive less than 10,000 km per year are generally considered lower risk. Average annual mileage is self-reported, so it’s important to be accurate. If you underestimate your mileage, you could be underinsured and have claims denied. Overestimating is not recommended either, as that will push your premiums higher than necessary.

Here are some mileage-related premium impacts:

 

  • Low mileage discount – driving 5,000 km or less may qualify for 5-15% off
  • Average mileage – 10,000-20,000 km is typical for most drivers
  • High mileage – driving over 20,000 km annually may increase your rate
  • Business use – using your vehicle for commercial purposes can increase your premium

 

Keeping your annual mileage reasonable and accurately reporting it helps keep your auto insurance rate optimized. Inform your provider promptly if your driving habits change significantly over time.

 

Vehicle Make/Model

The make and model of vehicle you drive is a significant factor in determining your car insurance premium. Insurers assign a rating to each vehicle make and model based on the average cost to repair or replace it. Vehicles that are more expensive to fix or that get stolen more often have higher insurance rates. Here are some general guidelines on how vehicle make and model impacts premiums:

 

Luxury cars – Brands like BMW, Mercedes-Benz, Audi and Lexus have premium components and technology that make repairs costly. This gets passed along in higher insurance premiums.

 

Sports cars – High-performance vehicles like Porsches, Ferraris and Lamborghinis are built for speed and power. Their engines and designs make them more susceptible to damage. Expect to pay higher premiums.

 

Electric vehiclesEVs like Teslas often have lower premiums thanks to advanced safety features and low maintenance costs. However, their expensive lithium batteries mean collision repairs are very costly.

 

Off-road capable – SUVs and trucks with 4×4 capabilities tend to have higher premiums because they’re used in higher risk driving situations.

 

Compact cars – Smaller economy cars like Honda Civics and Toyota Corollas have lower premiums on average because they’re inexpensive to repair and less powerful.

 

Vehicle Safety Features

The safety features and technology your vehicle is equipped with can have a significant impact on your insurance premiums. Modern vehicles now come standard with advanced systems designed to avoid collisions and minimize injury in the event of a crash. Insurance companies look favorably on vehicles with these latest safety enhancements and will typically offer lower rates compared to less equipped models.

Some of the biggest factors insurers consider are:

 

  • Airbags – Vehicles with more airbags, including side curtain and rear airbags, tend to receive lower rates. Airbags greatly improve occupant protection in collisions.
  • Anti-lock brakes (ABS) – ABS prevents wheels from locking up and helps drivers maintain control in emergency braking situations. ABS is standard on most new vehicles and earns discounts from insurers.
  • Alarm system – A factory installed alarm that activates when someone tries to enter the vehicle illegally signals that the car is less prone to theft. Insurers pass on savings for the reduced risk.

 

The more advanced safety equipment your vehicle has, the more you can save on your premiums. When purchasing a new or used vehicle, be sure to inquire about all the built-in safety features. Opting for a model with the latest technology can pay dividends through lower insurance rates over the life of your ownership.

 

Vehicle Performance

The type of vehicle you drive can significantly impact your insurance rates. Sports cars, luxury vehicles, and high-performance cars typically cost more to insure than modest family sedans or economy cars. This is because insurers associate these types of vehicles with a higher risk of accidents, injuries, and claims. Sports cars encourage speeding and aggressive driving which leads to more crashes. Their powerful engines also mean more expensive repairs when accidents do occur.

Family cars and minivans often have the lowest insurance rates. These vehicles are designed for safety and practicality, not performance. Large sedans and SUVs also tend to have lower premiums than sports cars. However, very large SUVs may have a higher rate due to their elevated repair costs.

Bottom line – if you want to keep your insurance rate down, avoid purchasing a high-end sports car. Opt for an economy or family car instead. Going for a used sedan rather than a brand new luxury vehicle can also save you money on insurance premiums.

 

Coverage Limits

The amount of liability, collision, and comprehensive coverage you choose directly impacts your premiums. Liability coverage pays for injury or damage that you cause to other people or their property. Collision covers damage to your vehicle from an accident, while comprehensive covers damage from non-collision events like theft, vandalism, or natural disasters. Higher limits mean you have more coverage, but also increase your rates.

The minimum liability limits are mandated by each province, but experts recommend getting more than the minimum. If you get into an accident and cause significant damage or injury, minimum limits may not be enough to fully cover the other party’s expenses. Buying higher limits reduces the chances you’ll have to pay out-of-pocket if you’re found legally responsible for an accident. However, significantly increasing your liability limits will raise your premiums.

Going with a lower deductible for collision and comprehensive coverage means you pay less out-of-pocket for repairs if you file a claim. However, you’ll pay higher premiums for the lower deductible. If you can afford to pay more upfront for repairs if needed, choosing a higher deductible saves on your monthly premiums.

Additional options like rental car reimbursement or roadside assistance provide convenience, but also increase rates. Carefully consider if the extra coverage is worth the cost for your situation.

 

Deductibles

The deductible you choose for collision and comprehensive coverage is a major factor that impacts your premiums. A deductible is the amount you pay out of pocket before your insurance coverage kicks in if you file a claim. Typically, you can choose deductibles in the range of $200 to $2,000 for collision and comprehensive.

Selecting a higher deductible translates to lower premiums. That’s because you are agreeing to cover more of the cost if you have a claim, so the insurance company doesn’t have to pay as much. Going with a $1,000 deductible rather than $500 could result in 10% or more in savings on your premium. However, you need to have the funds readily available to pay the deductible amount if you do file a claim.

Conversely, choosing a lower deductible increases your premium but reduces the out-of-pocket costs you would pay if you need to make a claim. For many drivers, picking a mid-range deductible around $500 provides a good balance between premium savings and financial protection in the event of a claim.

 

Additional Options

Beyond basic coverage, most insurers offer additional options you can add on for an extra premium. Two common choices are rental car reimbursement and roadside assistance coverage.

Rental car coverage will pay for a rental vehicle if your car is in the shop being repaired after an accident. This saves you from having to pay rental costs out of pocket. Roadside assistance provides towing and services like battery jumps, fuel delivery, flat tire changes, and lockout service. It’s a good option if you want extra peace of mind in case you break down.

Adding on these extra features will raise your premium, so weigh the convenience and protection against the cost. But they may be worth it, especially for older vehicles prone to breakdowns or if you can’t easily afford rental cars on your own.

 

Where You Live Impacts Rates

Where you live plays a major role in determining your car insurance premiums. Insurance rates can vary significantly between provinces, and between urban and rural areas.

Rates tend to be highest in provinces like Ontario and Alberta where auto insurance claims are more frequent. Provinces with lower population density like Saskatchewan often have lower average premiums. Each province has its own regulations which impact pricing as well.

Urban areas generally have higher premiums than rural regions. With more cars on the road, accidents happen more often resulting in more claims. Large cities also have higher rates of auto theft. Insurers pass these increased risks on to customers through higher urban premiums.

Your specific neighborhood can also impact your rate. Areas with high crime, frequent accidents or expensive homes may mean you pay more. Moving to a “safer” neighborhood could lower your premiums over time.

Insurers look closely at local data to set rates reflecting risk levels by region. Understanding if you live in a high cost area is key to evaluating the competitiveness of premium quotes.

 

Accident Frequency

Where you live plays a big role in determining your rates. Insurance companies look at accident frequency and claim rates in your city, province, and even your specific neighborhood. Areas with higher accident rates and more claims filed will have higher premiums. Large urban centers tend to have more congested roads and more accidents, so rates are higher compared to rural areas. Within a city, premiums will vary by postal code. The more accidents and claims in your postal code, the more you can expect to pay. Insurance companies gather detailed statistical data about accident rates and factor this into their risk assessment. If you move to an area with lower accident frequency, you may see your rates decrease.

 

Discounts to Ask About

Insurance companies offer a variety of discounts that can help lower your premiums. Here are some common ones to ask about:

 

Bundling Home and Auto Insurance

Many insurers will knock 5-15% off your total premium if you bundle multiple policies, like home and auto insurance, together. This incentivizes you to keep all your policies with one company.

 

Good Student Discount

Full-time students under 25 who maintain a B average or higher can get up to 25% off. Proof of grades is required.

 

Defensive Driver Course

Completing an approved defensive driving course can earn a discount of 5-10%. These courses teach accident avoidance skills.

 

Low Mileage

Driving less than a specified threshold, usually around 8,000-10,000 km per year, can earn you a lower rate. This is because you’re on the road less.

 

Good Credit Rating

Insurers view good credit as an indicator of financial responsibility. Maintaining a high credit score could save you 10-20% or more.

 

Group Affiliations

Alumni, professional, or other associations you belong to may have partnered with insurers to offer special discounted rates.

 

Getting Quotes

Getting quotes from multiple insurers is one of the best ways to find savings on your car insurance. Here are some tips for effectively comparing rates:

 

  • Get quotes from at least 3-5 different insurance companies. This allows you to compare rates side-by-side.
  • Compare the same coverage limits and deductibles across insurers. This creates an “apples to apples” comparison.
  • Review all available discounts with each insurer. Make sure you are receiving credits you qualify for.
  • Adjust coverage options to match your needs and budget. Consider raising deductibles or lowering limits if possible.
  • Take advantage of online quotes and comparison sites. But follow up directly with any insurers of interest.
  • Ask about bundling your home or other policies. Multi-policy discounts can yield substantial savings.

 

Shopping around for the best rate takes a bit of work. But the payoff of finding the optimal premium is well worth the effort. Comparing a wide range of insurers and coverage choices will help you secure the lowest price.

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Questions About Car Insurance Premiums

In Canada, young drivers under the age of 25 are considered high risk by insurance companies and typically pay much higher premiums. This is because young drivers, especially teens, are statistically more likely to get into accidents. As you get older and gain more driving experience, premiums will decrease. Once you reach around age 25, premiums will drop substantially.



In addition to age, insurance companies take into consideration:

– Driving history and record of accidents/violations

– Years of driving experience

– Where you live

– Type of vehicle you drive

– Your credit score and history

– Coverage types and policy limits

– Discounts for which you qualify

 

Those with clean records, more experience, lower-risk vehicles, good credit and higher deductibles tend to pay less.

Where you reside in Canada can significantly impact your car insurance rates. Urban areas like Toronto and Montreal with high rates of auto theft and accidents will have higher average premiums. Rural and suburban regions typically have lower risk and therefore lower premium costs. Your specific neighborhood can also be factored in.

The make, model and age of your vehicle definitely impacts premium costs. Sports cars, high-end luxury vehicles, and performance cars that are expensive to repair and targets for theft have much higher premiums. Older cars also tend to cost more to insure. On the other hand, safer family sedans and vehicles with high safety ratings have lower insurance rates.

Insurance companies place significant importance on your driving record and history. Drivers with past speeding tickets, at-fault accidents, DUIs or other violations are considered high risk and charged higher premiums. Maintaining a clean record with no incidents will earn you lower rates. The longer you go incident-free, the more your premiums decrease.

 

Yes, most Canadian insurance companies take your credit-based insurance score into account when determining premiums. Drivers with poor credit are seen as more high risk and tend to pay higher rates. Having good or excellent credit can help lower your premium costs. Improving your credit over time can also help reduce what you pay.

Choosing higher deductibles – the amount you pay out of pocket if you file a covered claim – will lower your policy’s premiums. Lower deductibles mean lower out-of-pocket costs if you have an accident, but will increase what you pay in premiums. Finding the right balance for your budget is key when selecting deductibles.

Yes, insurance companies consider married drivers and those with children generally lower risk. Data shows they tend to drive more carefully than single drivers without kids. This earns married drivers and families discounted premium rates compared to those that are unmarried or childless.

Most insurance companies offer a wide variety of discounts to help lower premiums. Common discounts include:

– Good driver discounts

– Good student discounts

– Multi-policy discounts when you bundle home or life insurance

– Group insurance discounts through employers, unions or associations

– Usage-based insurance discounts for driving less

– Discounts for safety features like airbags and anti-theft devices

Historically, men paid more for car insurance premiums in Canada due to higher risk. However, as of 2023, insurance companies can no longer use gender as a rating factor when determining premium costs. Now men and women with similar profiles pay comparable rates in Canada.

A single speeding ticket can increase your car insurance premiums by 15-30% on average. However, the impact is usually temporary. Most insurers will raise your rates for 3 years after the violation. If you maintain a clean record, your rates will then drop back down. Multiple tickets extend the premium increase.

Being at-fault in an auto accident can raise your premiums substantially – up to 30% or more in some cases. Higher risk drivers may see increases of 100% or higher. Like tickets, premium hikes from at-fault accidents typically impact rates for 3 years before dropping if you maintain a clean record.

A DUI conviction can skyrocket your insurance rates by hundreds of dollars per month in some cases. A DUI often leads to a 100% increase or more for minimum required coverage. Canada’s highest risk drivers may pay $5,000+ per year after a DUI. Rates remain very high for as long as 10 years in most provinces.



The best way to find affordable rates is to comparison shop. Get quotes from multiple top insurers both online and from local agents. Look for companies offering discounts that match your profile and apply to save. Only purchase required minimum coverage to lower premiums more. Consider raising deductibles as well.



The legal minimum auto insurance coverage varies slightly depending on your province. But all include third-party liability coverage in case you injure others or damage property in an at-fault accident – typically $200,000 minimum. Some also require a minimum of accident benefits coverage for your medical bills and income loss.



While only carrying minimum required coverage does lower premium costs, it leaves you and your vehicle dangerously under-insured. Adding collision and comprehensive coverage should be strongly considered to properly protect your assets. Going above provincial liability minimums also protects you better financially.

If you have a poor driving record, DUI or other infractions, specialty non-standard insurance companies generally offer the most affordable rates. Companies like Facility Association, Echelon, Perth Insurance, and High Risk Insurance provide minimum coverage policies to high-risk drivers unable to get insurance elsewhere.



Adding a teen to your policy raises rates tremendously due to their lack of experience. Strategies like only letting them drive certain vehicles, taking a safe driver course, maintaining good grades, limiting mileage, or temporarily listing them as an “occasional” driver can help minimize the premium increase.



Even if there is no visible vehicle damage or injuries after a minor accident, you should still report the incident to police and your insurer. If the other driver reports it later and you did not, you may get investigated for insurance fraud. Plus unreported claims can still impact your rates down the road.



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