To be eligible to drive a car in Canada you first need two things: a valid driver’s license and auto insurance. The fees for the former are at a fixed price set by the province you reside in. But, as anyone who’s ever asked friends how much they pay in insurance knows, annual premiums can be as varied as the makes and models of vehicles on the road.
Big brained – and very well-paid – actuaries spend their days figuring out various risk scenarios to calculate the fees insurers will charge. Here are the key considerations they use to figure out your rate.
Drive With Care
The number-one factor used in calculating car insurance rates is your driving record. If you haven’t been driving long enough to establish a record, you’ll pay a premium for that. And if you tend to amass speeding tickets like a kid collecting hockey cards you’ll pay a major premium. The odd moving violation every few years shouldn’t have much of an impact, but insurers will view frequent tickets as indicative of how you drive all the time.
It Gets Better With Age
The driver's age is another key factor; 25 is the magic number for most providers. That’s when your rate will drop significantly based on the expectation that you will have enough experience and maturity to drive with care. On the other end of the spectrum, many underwriters provide a seniors’ discount for “mature” drivers on the expectation that they’ll behave that way behind the wheel.
Don’t Drink and Drive
It should go without saying that you shouldn’t drink and drive. But if you need one more reason to add to the list, you’ll pay a hefty annual fee for insurance if you get your license back after a DUI charge. While we were in our 20s, a friend of mine got busted for drunk driving. He lost his license, and spent a few weekends in a “country club” jail. He was so excited to get his license back that money was no object for him in order to get back behind the wheel. Good thing too; he spent more than $10,000 on car insurance for one year. (At the time, with my clean driving record, I was paying less than $1,000.)
Consider What You Drive
One reason that my friend ending up paying $10,000 for a single year’s insurance was that he was driving a sports car when he got his license back. For obvious reasons, insurers are going to consider something like a Ferrari that can go 250 km/h a bit of a riskier bet than a family station wagon. Those that seek out vehicles that have better-than-average safety ratings should benefit from a discount.
Home, Expensive Home
Location, location, location is the mantra in the real estate business, but it also plays a role in your insurance premiums. Insurers charge clients a premium if they live in an area deemed to be at a higher risk of theft or getting into accidents. That said, suburban and rural residents who have to drive further and more frequently may also face higher premiums based on annual mileage. Regardless of where you live, if you use your car on a daily basis, you’ll pay more.
One way to save money is to combine all your insurance policies (homeowner’s/rental fire and theft, life insurance, etc.) under one provider to get a multi-policy discount.
Another option is to use an insurance broker to do the shopping around for you. Much like a mortgage broker, insurance brokers have inside connections to providers and know where to look for the best rates based on your profile. Best of all, their fees are coverage by the insurance provider in the form of a commission.
Busting A Roadside Legend
According to the Insurance Bureau of Canada, insurers are colour-blind, at least when it comes to the paint job on your car. “The colour of your car does not affect your automobile insurance premium. You will not be asked to specify the colour of your vehicle on your auto insurance application.”
Editor Tip: Looking to lower your current car insurance premiums? Sometimes it's as simple as switching to a new provider. Check out RATESDOTCA's brand new car comparison service to get the best quotes in your region.