How Car Insurance Premiums are Calculated

There are a number of factors that insurance companies take into consideration when calculating your car insurance premiums. It pays to understand how your insurance premiums are calculated so you can find the right coverage for your needs - at the right price.
8 most common elements car insurers consider:

1. Your car

The make, model and year of your car all affect your insurance premium.
Your premium might be lower if the car model has been statistically proven less likely to be involved in an accident or be stolen. It also might be lower if the vehicle has better safety and handling characteristics, or is less costly to repair.
Insurers also consider how much it would cost to replace your car if it was stolen or damaged beyond repair.

2. How often you drive

Depending on how often you drive, you may be at an increased risk of being involved in an accident. This affects your insurance premium. Insurers determine this by examining the number of kilometers you drive per year.

3. If you are driving for commercial purposes (not just commuting to your workplace)

If you use your vehicle for work, you may need to get commercial car insurance coverage. That’s because your personal car insurance policy will not cover any accidents, damage or theft that occur on a work vehicle. Your business may also require a higher liability limit than is typically available through personal car insurance policies.

4. Your driving record

Insurance companies use your driving record to determine how much of a risk you pose on the road. Generally, the better your record, the lower your insurance premiums will be.

When looking at your driving record, insurers mainly look at:

  • The number of drivers
  • The number of years you’ve been licensed for
  • Any convictions due to driving infractions
  • The number of accidents you’ve had
  • Speeding tickets

Don’t forget: Insurers also take into account the number of drivers who use your vehicle and their driving records as well.

5. Where you live

In Canada, your insurance premium will differ depending on where you live. Car insurance premiums are generally higher in and around large urban areas due to a higher number of accidents and theft or vandalism claims.
In some provinces, insurers establish categories to classify people with similar profiles. Belonging to a group that is statistically more likely to be at fault in an accident or drive more recklessly could affect your insurance premium.

6. The coverage you choose

While your provincial or territorial government dictates the minimum amount of insurance you must carry, you also have a number of coverage options to choose from. The amount of coverage you carry is an important choice, which affects the level of protection afforded by your insurance policy. Generally, the more protection you carry, the more it will cost to insure your vehicle.
Tip: If you want to lower your car insurance premium, an easy way to do it is to increase your deductible.
A deductible is the amount of money you have to pay towards a repair before your insurance covers the rest. For example, if you are in an accident that causes $5,000 worth of damage to your car, and your deductible is $1,000 - you have to pay $1,000 towards the repair, and your insurance company covers the remaining $4,000.

7. Special savings

To get the best value for your car insurance, make sure to check out if you are eligible for any discounts or preferred rates. We can help you save if you:

  • Belong to a professional association*
  • Are a graduate of a Canadian university or college*
  • Bundle your auto and home insurance
  • Drive a hybrid or electric vehicle

8. Factors beyond your control

Some factors that affect your premium are not related to you or your vehicle. For example, if the government introduces a new regulation, or if the rate of inflation changes, your premium may be affected.

*Exclusive to professional or alumni groups that have an agreement with us.

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