In Canada, everyone needs to maintain a mandatory minimum amount of auto insurance to legally drive a vehicle on the roads. This has resulted in a huge number of auto insurance providers offering policies at a wide range of prices. It’s no wonder people have trouble finding the best price. You need to first understand how auto insurance rates are determined.
There are two parts that make up an auto insurance rate: the driver(s) and the vehicle.
Drivers and insurance rates:
The driver portion of the premium is based on things such as age, previous accidents and whether the person has any traffic tickets. Actuaries have proven those things can increase the likelihood of the driver having an accident. The higher the risk the more the insurance.
Your vehicle’s impact:
Vehicles contribute to your car insurance premium through factors such as:
- Cost to repair the vehicle
- Daily commuting distance
- The customer’s location
For example, a downtown area could pose a higher risk of theft and vandalism to your vehicle than somewhere in the suburbs of your city. Similarly, commuting between cities would expose your vehicle to more risk on the road on a daily basis than if you drove 10 minutes to work on the same side of the city.
The “appetite” of the insurance company also comes into play. Some insurers may not be comfortable with expensive vehicles and may price those higher than common, less expensive options. Other companies may not like to insure vehicles in big cities and give those a high premium. Still others may gravitate towards older drivers. Doing a bit of research and asking the right questions when you are shopping could prevent you accepting a high price because the company doesn’t really want your business.
Shoppers should also be aware that, like many things in life, you usually get what you pay for. Companies that offer the cheapest rates without closely examining your driving history might also be omitting important coverage (like coverage for collisions or accident forgiveness).
Finding the cheapest auto insurance in your area is not a straightforward process. However, understanding how insurers approach the pricing of their policies should provide you with the tools to comparison shop more effectively.