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These are the top five factors that influence your auto insurance rate

Feb. 27, 2023
7 mins
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This article has been updated from a previous version.

When you consider your auto insurance policy, chances are your annual rate comes to mind first. And without an inside perspective, the premium you pay may seem like an arbitrary number assigned to you by your insurance provider. But there are several factors that inform your rate.

While you may think being a “good driver” is all it takes to score a low premium, that’s not necessarily the case. Some factors can weigh heavier on your premium than others. In an effort to find out where your rate really comes from, we’ve used RATESDOTCA auto insurance quoter data to determine the top five factors that insurance providers look at when calculating your auto insurance rate — from the most to least influential.

Though the weighting of these factors can vary by insurance company and by province, this list will give you an idea of how your next premium might be calculated and show you what factors you can control when it comes to your insurance costs. The results might surprise you.

1. Vehicle make and model

While the make, model, and year of your vehicle impacts only a portion of your premium, this information provides an insurance provider with a lot of insight into the likelihood of you filing a claim — and how much your claim might cost them. The value of your vehicle can help determine how much the insurance company might have to pay to repair or replace it.

“There’s a big difference between replacing a bumper of a car that has motion sensors and replacing a bumper that doesn’t,” says Tanisha Kishan, RATESDOTCA expert and chartered insurance professional. “Many of the features of modern cars that make them so convenient can also make them expensive to replace.”

Certain makes and models also have a higher frequency of being stolen compared to other vehicles with loss-prevention features, for example. So even if you drive an expensive vehicle, you may not necessarily pay a higher premium. Anti-lock brakes and anti-theft devices could make the difference between a lower and higher premium.

Ultimately, insurance claims data is used to assign vehicle models a risk rating under the Canadian Loss Experience Automobile Rating (CLEAR) system. This system plays a big part in determining the premium for your specific vehicle. And because your vehicle is predictive of both claim probability and cost, it can be considered the most influential factor when determining insurance premiums.

Fortunately, you have control over the vehicle model that you purchase, so be sure to do your research and find out which vehicles have high theft rates or expensive technological features.


2. Driving experience and insurance history

Since auto insurance in Canada is mandatory, the number of years you’ve been driving goes hand in hand with the number of years you’ve been insured. And the more uninterrupted driving experience you have under your belt, typically the lower your premium will be.

“Insurance providers will want to know about any gaps in your insurance coverage as it may affect your premium, especially if it was for a negative reason, such as non-payment or the result of misrepresenting your policy information,” says Kishan.

A gap in coverage can also put you back at square one in terms of your perceived driving experience. “Some providers may also treat it as your first insurance policy if the gap is over a certain amount of time,” says Kishan.

All in all, your coverage history can divulge valuable information that your past driving convictions and collisions might not. “Depending on the reason for a gap in your insurance, it may matter more to an insurance provider than your driving record,” says Kishan.

If you’re switching insurance providers, make sure your coverage remains seamless. Teen drivers should also consider getting listed on their parents’ policy as early as possible to build up their insurance history.

3. Age

Your age functions as an extension of your driving experience but is still an independent factor that can affect your car insurance rate on its own. Drivers under 25 are considered inexperienced and haven’t had the chance to prove their driving ability quite yet. Because of that, they face higher auto premiums. A 16-year-old driver who just got their licence can also be more likely to see a high insurance rate than someone only a few years older.

Comparatively, age can be a positive for older drivers when it comes to insurance prices. Some car insurance companies will offer lower premiums to drivers over 60. Those who fall under this age category are usually more likely to practice safe driving habits and have more years of consistent driving experience and insurance coverage for providers to refer to.

Unfortunately, this is one factor you can’t control.

4. Postal code

Certain cities and towns in Canada have higher claims frequency than others. If you live in a city or town that collectively files more claims than other locations, chances are your auto insurance rate has been affected by it.

Using geographic location to help determine rates has been scrutinized as postal code discrimination, with critics arguing that personal driving records should be more indicative of claim payouts in a given area. Yet, this factor still weighs on your premium, and any legislative changes in terms of its impact on your insurance rate remain to be seen.

If you’ve recently moved or plan to in the future, make sure you compare car insurance rates in your new location to ensure the lowest premium possible. A provider that hasn't paid out a lot of claims in your new postal code might offer a lower rate than one that has.

5. Driving record

Although it may come as a surprise, insurance providers generally don’t weigh your personal driving record most heavily when determining your car insurance rate. However, it’s still an essential component that helps insurance companies understand your driving habits and price your policy accordingly.

For example, if you’ve accumulated tickets for major or minor traffic convictions, it’s not unreasonable to assume you’re capable of the same infractions in the future. Traffic tickets can therefore be a good risk indicator when predicting claim probability and increase your insurance rate for three years.

Similarly, if you have at-fault claims on your driving record, meaning you submitted an insurance claim and were deemed at least partially responsible for the cause of the collision, your insurance rate can see an increase for six years.

So, if you’re looking for a chance to lower the premium you pay, it’s time to prioritize a clean driving record. Obeying the rules of the road and anticipating the actions of drivers around you — beyond ensuring everyone’s safety — could mean savings.

Honorable mentions: other factors that affect your auto insurance rate

The factors that determine your auto insurance rate are not necessarily cut and dry. There is always room for variance when it comes to sorting factors in order or even assigning multiple factors the same weighting.

In addition to the top five most influential factors, the following can also affect the insurance rate available to you:

  • Mileage. As the pandemic showed us, driving fewer kilometres per year is an easy way to lower your auto premium. Usage-based insurance (UBI) and pay-as-you-go insurance enable you to reap savings for low mileage and safe driving. However, not all companies offer telematics software.
  • Credit score. Some auto insurance providers see a correlation between credit ratings and the risk of collisions. So, a good credit score could potentially lower your premium (but this is only applicable in some provinces — excluding Ontario and Newfoundland and Labrador).
  • Gender. On average, women have fewer collisions and lower claim amounts than men in Canada, which usually allows them lower rates. Gender usually only impacts insurance rates for those under 25 and becomes less influential of a factor for those over 25.

Some of these factors are within your control, while others aren’t. But the one tool you always have at your disposal to defend against overpaying for car insurance is to shop around before you sign up for a policy. RATESDOTCA is there to help you secure the lowest car insurance quotes available to you in Canada.

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Michelle Bates

Editor and Writer

Michelle Bates is an editor and writer in the personal finance space. She has seven years of content writing experience.

She has a Bachelor of Arts (Honours) degree from Queen's University in English Literature and Sociology along with a Publishing - Book, Magazine and Electronic graduate certificate from Centennial College. Michelle specializes in personal finance content, including mortgages, home, auto, and travel insurance, and credit cards. Her work has been covered by notable Canadian news sources like the Financial Post, the Globe and Mail, CTV News, and Narcity.

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