Car insurance premiums can vary widely. They differ based on everything from your geographic location to your driving record.
There are many factors that influence the cost of your premium. Some of those factors are obvious, some less so. Generally speaking, there are five factors which almost every automobile insurance policy uses to determine your premiums.
Let’s take a look at what these factors are and what you can do to keep those premiums as low as possible.
Five Key Factors For Calculating Car Insurance Premiums
1. Your Car
Perhaps the most obvious factor is also one of the most important factors: the make and model of your car.
Insurance agencies rate cars based on how safe they are to drive and how likely they are to be stolen.
If you’re driving a car with a poor safety rating or one that is considered more likely to be stolen, you can expect to pay more for your insurance premiums.
Another contributing factor to this can be modifications. If you’ve modified or plan to modify the car in any way, it’s important to let your insurance broker know about these changes as they could affect your insurance premiums or even leave you driving uninsured if you violate the policy.
2. Your Driving Record
Insurance companies are always concerned with your personal driving record. This lets them determine how risky it is to insure you.
If you have at-fault accidents on your record, you can expect to pay a lot more for your insurance. But if you have a squeaky clean driving record, you might be eligible for discounts such as a good driver discount.
Factors which impact your driving record include:
- How long you’ve had your driver’s license
- How many automobile accidents you’ve had (especially where you are determined to be at-fault)
- How many traffic tickets you’ve had (such as speeding tickets)
- Any past convictions for traffic related offenses
3. How Much You Drive
When applying for insurance, you’ll be asked how often you use your vehicle (how many kilometres per year) and what sort of driving you do most with the vehicle (commuting to work or just for recreational fun.)
Insurance companies factor this information into the risk of insuring you. Even if you are an excellent driver with an immaculate driving record, there is still the simple statistical truth that those who drive more frequently have more opportunity to be in an accident.
As a result, drivers who drive more are also likely to pay more.
4. Where You Live
Insurance rates vary from area to area. Different regions have different degrees of risk. The risk can change from province to province, city to city, even postal code to postal code.
If you live in a city with a particularly high rate of auto theft, you can expect to see higher insurance premiums. Similarly, if you live near a highway which is known for frequent traffic accidents, your insurance premiums may rise to reflect this increased risk.
5. Why You Drive
Every automobile needs insurance, but not every automobile serves the same purpose.
If you’re using your vehicle for commercial usage (for example if it’s a business vehicle) you will need to purchase commercial automobile insurance which differs in pricing and coverage from normal automobile insurance for an everyday car.
Other Factors
While these five factors are the most common and among the most important, there are a long list of other factors which can affect your premiums. Many of them you have no control over.
Here are just a few:
- Government regulations
- Inflation rates
- The type of policy you choose
- Discounts for things like bundling insurance policies (home and auto,) or driving a certain type of vehicle (such as a hybrid)
Want to Know More?
There are many ways you can save on insurance. One of the best ways? Go with an insurance broker! As brokers, we have the expertise and experience required to give you the best possible advice. Send us an email, give us a call or stop by one of our community branches. We’re always ready to talk about saving money on insurance.
