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8 Factors That Affect Your Car Insurance Rate: What You Can and Can’t Control

If you drive a vehicle in Canada, or if you're shopping for one, you need car insurance. This mandatory expense protects you and your vehicle in the event of a collision or other damage. However, you may not know how your insurance rate is calculated, despite its long-term impact on the cost of car ownership.

Several factors can impact your car insurance rate. Some are within your control, while others are not. 

Fortunately, shopping the market and comparing auto insurance rates is one of the most effective ways to ensure you aren’t overpaying. This, coupled with the knowledge of the many factors that determine your premium will go a long way in ensuring you’re getting the best price for your policy.

    Factors you can control when it comes to your car insurance rate

    1. Driving record

    While demerit points won’t factor into your premium calculation, your driving record⁠—including major and minor traffic tickets and at-fault insurance claims⁠—will give your insurance provider a window into your driving habits. The number of tickets and severity of each infraction will be considered.

    For instance, if you have a history of speeding tickets, your insurance provider might see an increased probability of you filing a claim and charge you a higher rate. A traffic conviction may increase your premium for three years while an at-fault claim can increase your premium for six years. So, maintaining a clean driving record is the best way to keep your rate low. 

    Parking tickets, on the other hand, don’t go on your driving record and have no impact on your insurance rate (so long as you pay the ticket on time). 

    2. Vehicle make and model 

    The vehicle you drive helps inform your insurance provider of your risk as a policyholder. Each vehicle has its own Canadian Loss Experience Automobile Rating (CLEAR) based on its claim probability as well as its cost to repair and replace. Certain safety features, for example, may lower your claim risk while also increasing the cost to repair due to their advanced technology. 

    Theft also plays into a vehicle model’s risk rating. If your model has zero loss-prevention features and a high occurrence of being stolen, your rate may be higher. That’s why it’s a good idea to prioritize a secure vehicle while keeping the cost implications of safety features in mind.

    3. Mileage

    Driving fewer kilometres annually can lower your auto insurance premium. Leveraging usage-based insurance (UBI) can show your insurance provider how many kilometres you drive and whether you’re a safe driver. You may be rewarded for spending less time on the road and proving that you’re a low-risk customer.

    4. Credit score

    Believe it or not, having a good credit score can come in handy when trying to lower your auto premium. Some insurance companies notice that customers with good credit ratings tend to have a lower collision risk and use it to help inform their premiums. However, your credit score may not be a factor considered by insurance companies in Ontario or Newfoundland and Labrador when setting a driver’s rate.

    Factors you can’t control when it comes to your car insurance rate

    5. Insurance history and driving experience

    Every driver has to start somewhere. And unfortunately, new drivers don’t have an insurance history for providers to refer to. That means your insurance company has no idea what risk it’s taking on when it comes to your payment habits. That’s why premiums for young drivers tend to be significantly higher. 

    It’s also possible to be treated as a new driver if you’ve had a gap in your insurance coverage for a certain period without a valid explanation, as this could indicate a past breach of your policy with another provider. Typically, the longer you go without any lapse in your insurance coverage, the lower your premium should be. And the earlier you can build up your insurance record to document your driving experience and reliability, the better. 

    6. Age

    Any driver under the age of 25 is considered inexperienced and as a result, will typically see higher premiums. A lack of experience means that as a driver, you haven’t had the chance to refine your skills, and with that comes risk. The younger you are, the higher the premium you can expect. However, age has the potential to offer a lower rate after 30 — so long as you have a clean driving record. 

    7. Postal code 

    While you can choose where you live most of the time, you can’t control how insurance providers price certain postal codes. One company might pay out a higher number of claims in a certain city or town than another, resulting in higher rates with that provider — even if you yourself haven’t filed a claim. 

    This practice has been criticized as “postal code discrimination,” particularly in Ontario. Though no legislative changes have been made, Ontario Premier Doug Ford has suggested that there is a future where your postal code could have zero influence over your auto insurance rate. Until then, however, it does impact your premium.

    8. Sex

    Men have long been known to be riskier drivers than women. According to the Insurance Institute for Highway Safety (IIHS), men are often involved in more severe collisions and are more likely to engage in unsafe driving practices like failing to wear a seat belt, driving while impaired, and speeding. 

    As a result, they pay higher insurance rates than women. However, the good news is that sex has less of an effect on your premium after the age of 25. 

How to lower your car insurance rate

Though the list above isn’t necessarily exhaustive, it does represent some of the top factors influencing your car insurance rate. 

Choosing a vehicle with a lower insurance cost and practicing safe driving habits are well within your control and can offset some of the factors you can’t immediately change, like your years of driving experience or your age. 

The best way to ensure these factors aren’t weighing you down for too long is to shop your policy annually, or when something significant changes about your situation (e.g. you move to a new city or town). Comparing rates allows access to the most affordable premiums offered by Canada’s top insurance providers—all in one place. 

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