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How are auto insurance premiums determined?

February 1st, 2016  |  Auto Insurance

Auto insurance is one of those financial products that everyone needs (if you have a car). However, not everyone is treated equally when it comes to the cost of auto insurance premiums. Insurance is not like a bank account where everyone - regardless of age, gender and social status - pays the same monthly free for a chequing account. Car insurance is much more personal.

Auto insurance premiums are based on several different factors, some of which you can control and some of which you can't. If you and your friend both purchase auto insurance from the same provider at the same time it's very possible you will be charged different rates. That's just the way it is. Have you ever wondered why that is?

Here are four factors that contribute to how your auto insurance premiums are determined:

Your past driving record, tickets, and experience

Car insurance premiums are calculated according to risk. If your past driving record is less than stellar you may find yourself paying more than expected to be insured. If you have moving violations and speeding tickets, or have demerit points, your insurance premiums will go up. 

On the other hand, if you have several years of driving experience under your belt and a clean driving record you may receive a discount on your insurance premiums Your driving history, the good and the bad, affects the cost of your insurance.

Your age at the time of purchase

When it comes to calculating risk, insurance companies feel that the younger a driver is the higher their risk can be of having an accident. Therefore, younger, more inexperienced drivers pay higher auto insurance premiums.

Even so, there are several discounts available to young drivers. Don't be shy: ask your insurance provider if there are discounts for completing Driver's Ed, graduating from university, or associated with your chosen profession. When it comes to saving money, don't be afraid to ask for a discount.

Auto insurance is gender biased

It's sad, but it's true. With all other factors being equal, women pay lower car insurance premiums than men. Why?  Because men are considered to be faster, more reckless drivers whereas women are perceived as being gentle and cautious. Whether or not these stereotypes apply to you, they are the reality.

The type of car you want to insure

According to the Insurance Bureau of Canada the make, model and year of your car all factor in to the cost of your insurance premiums:  "Generally, the harder your car is to steal and the less expensive it is to repair, the less you pay for insurance."

Just because your auto insurance premiums are calculated based on a variety of factors, it doesn't mean that all insurance providers are created equally. If you're purchasing car insurance for the first time, or if your policy is up for renewal, remember to shop around to find the best rates. 

Our FREE online auto insurance tool helps compare quotes from different providers in your area in just a few seconds.

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