How well do you understand your auto insurance policy and the things that affect your premium?
A new RATESDOTCA survey finds a majority of Canadian drivers are influenced more by common myths and misconceptions than actual facts. The survey featured seven statements that respondents were asked to answer as true or false. No one participating in the survey got all of the answers correct, with the average score being almost three (2.6) out of seven questions answered correctly. A total of 9% of Canadians who participated in the survey got all seven questions wrong. Here are the survey statements and how Canadian drivers responded to each one:
1. You can switch to a different auto insurance company before your existing policy is up for renewal.*
Fact: Yes, you can. You are not bound to your insurance provider for the whole year, and you do not have to wait until renewal to cancel or change your existing insurance company. You can shop around and cancel your policy should you find another one that suits your needs and budget better. If you cancel your policy midterm, the insurer may charge a cancellation penalty or administrative fees. The cost of cancelling may be as low as a few bucks, or it could be a percentage of your overall premium. Therefore, you need to ensure it makes financial sense to cancel a policy midterm. Also, you may be required to provide your existing insurer with a cancellation letter. If not, it’s worthwhile to do so anyway so there is a record of the date you asked for your policy to be cancelled.
Survey result: More than half (57%) of the survey’s respondents are aware they can switch to a different auto insurance company before their existing policy is up for renewal. Sixty-three per cent of Canadians aged 55 or older are more likely to know they can change insurers before their policy expires, whereas 53% of people under the age of 55 know that.
2. Comprehensive auto insurance coverage means my vehicle is covered for everything.
Fact: Comprehensive coverage is an optional type of coverage you can add to your policy. Although it does not cover everything such as damages resulting from a collision, it does pay for damages or losses resulting from specific perils such as theft, vandalism, fire, hail and objects that fall on your vehicle (like a tree branch) or that fly off the road (like a stone off the back of a truck).
Survey results: Few Canadians seem to know comprehensive auto insurance does not mean their vehicle is covered for everything (34% answered correctly, 42% answered incorrectly, and 24% did not know).
3. An expensive or high-end vehicle costs more to insure than a less expensive one.
Fact: Insurers consider many factors when determining your premium, but the cost of the vehicle you buy isn’t necessarily one of them. What may be a factor is how easy it is to steal the vehicle you drive, and how expensive it is to repair. The other factors insurers look at includes your age, gender and marital status, where you live, driving and claims history, and how much you drive.
Survey results: Most respondents (79%) think an expensive or high-end car does cost more to insure than an economically priced vehicle (8% do not and 13% did not know). High-end cars are typically more expensive to insure than less expensive vehicles although this isn't always the case.
4. You can get a discount on your insurance bill if you purchase both auto and home or condo insurance from the same provider.*
Fact: Most insurance companies offer discounts if you buy both auto and home policies from them. Insurance companies in Canada typically offer a 5% to 15% discount off individual policies when you choose to bundle them.
Survey results: Overall, 78% of Canadians know they can get a discount on their insurance bill if they purchase both auto and home or condo insurance from the same provider. People who are 55 years of age and older are more likely to know they can (83%) compared to people under the age of 55 (74%).
Interestingly, Quebeckers (92%) are more likely to know you can get a discount on your insurance bill if you purchase both from the same provider compared to 74% of respondents from the rest of Canada.
5. The colour of a vehicle can affect the cost of an insurance premium.
Fact: False. There is a misconception that red cars, for example, get in more accidents, but this isn’t true. While colour doesn’t factor in when insurers are calculating insurance premiums, the make, model, and year of the vehicle will definitely affect your rate.
Survey results: Less than half of the respondents (39%) know the colour of the vehicle does not affect the cost of a premium. Thirty-eight per cent of Canadians think it does, and 23% did not know. More Quebeckers (52%) know the colour of vehicle does not impact the cost of insurance compared to 35% of respondents from the rest of Canada.
6. Insurance companies base your auto insurance premium on the number of demerit points you may have.
Fact: Incorrect. Demerit points are used by provincial governments to determine whether or not your driver’s licence should be revoked, they do not affect your premium directly. However, the number of tickets you have, and the severity of those tickets certainly do. Demerit points are designed to encourage safe driving behaviour by holding drivers responsible for their actions on the road. Everyone starts with zero demerit points. They are added to your driving record if you are convicted of violating specific traffic laws.
Survey results: Though 68% of the respondents think insurance companies base your premium on the number of demerit points you have, they do not. Only 10% answered that one correctly and 22% did not know.
7. If you are not driving at all because of the COVID-19 pandemic, you can temporarily suspend your car insurance coverage.
Fact: True. Regardless of the pandemic, you can ask your insurer to remove the road coverage on your vehicle. However, if you do so, you cannot drive that car under any circumstance until coverage is reinstated.
In Ontario, you may need to sign what’s called Ontario Policy Change Form (OPCF) 16 to suspend your coverage. To reinstate coverage on a vehicle, you may be asked to sign OPCF 17 before you drive again. The requirements are similar in Alberta, but these documents are called Standard Endorsement Form (SEF) 16 to suspend coverage, and SEF 17 to reinstate your coverage.
Survey results: Although you can temporarily suspend your auto insurance coverage if you are not driving at all because of the COVID-19 pandemic, just 39% got it right, 25% were incorrect, and 36% said they did not know.
Why understanding how auto insurance works can save you money
The more you know about your policy, its limitations and exclusions, and how your insurer determined what your premium is, the more likely it is you will get the coverage you need at the lowest possible price.
Here are a few straightforward ways you can up your auto insurance knowledge:
- Tap into freely available resources to learn more about how car insurance works
- Find out about things you can do to potentially lower your premium
- Talk to your broker or insurance agent and ask for a review of your policy, get the full details on what you are and are not covered for, including finding out what your policy’s limitations, exclusions, and deductibles are
- Navigate your way around the most common car insurance myths
Above all, whether your auto insurance policy is up for renewal or not, take a few minutes to shop around by comparing quotes. It’s the most efficient and easy way to find out what types of coverages are available to you from different insurers at various prices.
About the survey
An online survey of 1,513 Canadians was conducted by Leger Marketing from August 7 to 10, 2020, using Leger’s online panel. The sample's ages ranged from 18 to 55+ years old. The margin of error for this study is +/-2.5%, 19 times out of 20.
*Answers from respondents in Manitoba and Saskatchewan, which have public insurance regimes, were excluded from this question because it does not apply to them.