What are the five factors that determine your auto insurance premium?

It’s normal for car insurance premiums to vary depending on a variety of factors. From your geographic location to your driving record, many elements come into play. As a result, your insurance rates will go up and down over time. By being a safe driver, the latter is more likely to happen. However, your insurance broker will always work with you to find you the coverage you need at an affordable rate.

With that said, many factors can influence the costs of your auto insurance premiums. Some are more obvious than others. Most of the time, five main factors affect your car insurance premiums and are used by your insurance company to determine how much you will pay. BrokerLink understands how the system works and will act as your guide to finding the best auto insurance rate. Let’s examine these factors and consider what you can do to keep premiums as low as possible.

Five key factors for calculating car insurance premiums

Developing safe driving habits will show your insurance company that you are a good driver and less of a risk on the road. Despite this, riskier drivers make the roads less safe for everyone. For this reason, you may pay a higher auto insurance rate. Some factors that affect your car insurance aren’t controllable, while others are. Now, let’s dive into the five main factors that affect your car insurance premiums:

Your Car

The make and model of your car contribute to your insurance premiums. This is because insurance companies rate cars based on how safe they are to drive and how likely they are to be stolen. If the car you’re driving has a poor safety rating or is more likely to be stolen, your insurance rates will soar.

Some people like to modify their vehicles. This is perfectly legal, but if you have modified or plan to modify your car, you should contact your insurance broker. These changes can affect your auto insurance rates. If you modify your vehicle and the value increases, your insurance may increase, too. You also risk invalidating your insurance policy—driving without insurance is illegal.

Your Driving Record

Your personal driving record is the most important thing to your insurance provider. Your driving record determines your risk factor on the road. Those who are deemed “high-risk drivers” are more likely to pay more for coverage.

If you have at-fault accidents on your driving record, you will have to pay more for your auto insurance premiums. In contrast, if you have a clean driving record, you may be eligible for discounts such as a safe driving discount. Factors which impact your driving record include:

• How long you’ve had your driver’s licence
• 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 offences

How Much You Drive

When applying for car insurance, you will be asked how often you use your vehicle (how many kilometres per year). In addition, you will be asked what types of driving you do the most. This can range from driving to work to going out for recreational fun. Depending on your habits, your insurance premiums can increase or decrease.

Insurance companies will use this information when determining the amount of risk insuring you. Sometimes, it doesn’t matter if you’re a safe driver with a clean driving record. Statistics don’t lie — those who drive more frequently are more likely to get into an accident. As a result, drivers who drive more are also likely to pay more.

Where You Live

Insurance rates will vary depending on where you live. That’s because different regions carry unique levels of risk. It can change from province to province, city to city, and even postal code to postal code. This factor is beyond your control, and you might get stuck paying higher premiums just because you live in a big city.

If your city has a high rate of auto theft, it can impact your car insurance. You will have to pay higher insurance rates in these areas. This is also true if you live near a highway that is known for frequent traffic accidents. Your insurance costs can change based on factors beyond your control, meaning all you can do is be the best driver you can be.

Why You Drive

Not having car insurance is illegal. However, not every automobile serves the same purpose and may require different types of coverage. Your insurance broker will help you find an insurance company that provides the coverage you need at an affordable rate.

For example, if you’re using your vehicle for commercial purposes, it’s considered a business vehicle. When this is the case, you will need to purchase commercial automobile insurance. The pricing and coverage are not the same as regular automobile insurance for an everyday car.

Additional factors to consider

Whether you can control them or not, many factors can affect your auto insurance rates. The list is much longer than the previously mentioned. It’s important to understand how insurance companies determine your rates because you can adjust your driving habits accordingly. 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)

Outside of these factors, age can affect car insurance and so can gender. Both of these are things that you cannot control. However, contrary to popular belief, marital status will not affect your car insurance rates. Luckily, there are factors you can control, which can, in turn, lower your car insurance. Next, we will focus on ways to lower your car insurance premiums.

Ways to lower your auto insurance premiums

When shopping around for car insurance, there are ways to find an insurance provider who will provide you with the coverage you need at a lower rate. Car insurance companies are all different and will offer varying levels of coverage. This is important to keep in mind. Let’s discuss ways to get lower car insurance rates below:

Use an insurance broker

By opting for a broker, you can get quotes from multiple insurance providers. Insurance companies offer various rates, and getting a broker means you don’t have to bother shopping around. Outside of factors beyond your control, you could be paying a high car insurance rate simply because of the company you have chosen.

Only make claims when necessary

If you don’t have accident forgiveness coverage, your insurance company may raise your rates after your first at-fault accident. Subsequent accidents will result in an even higher insurance premium. It’s because your claim probability will increase, and the claim will stay on your record for three years. That’s why you should pay out of pocket for repairs if you can afford it instead of filing a claim and increasing your premiums.

Get a higher deductible

Premiums and deductibles go hand in hand. The deductible is the amount that your insurance provider will ask you to pay if you have to file an insurance claim. Having a higher deductible makes more sense because anyone in the insurance industry knows that your rates will be lower if your insurance provider doesn’t have to pay out as much after a claim. It allows you to easily lower your insurance premium if you’re a safe driver.

See if your insurance company offers discounts

Many insurance companies offer discounts for things like bundling your home and auto insurance. Safe driving habits can lower your insurance rates even when this isn’t the case. Driving for years without any accidents will pay off in the long run. It will allow you to lower your car insurance simply for being safe on the road.

Car insurance coverage is essential if you spend time on the road. However, many factors affect your insurance rates no matter what type of liability insurance coverage you have. That’s why you need to be proactive and work with a broker to do things like compare collision vs. comprehensive coverage. With that said, you should always be aware of what’s affecting your rates so that you can lower them over time.

Contact BrokerLink today!

Shopping around for car insurance isn’t easy. You have to call around and speak with agents from various insurance agents to find the best rate. However, with a broker by your side, you won’t have to worry about anything. At BrokerLink, we will advocate for you to find the car insurance policy that suits your needs.

A car insurance policy is made up of several types of coverage. Depending on the types of coverage you have, your car insurance rate can vary. Here are the most common types of coverage available in Canada:

• Third-party liability coverage
• Accident benefits coverage
• Direct compensation - property damage coverage
• Uninsured automobile coverage
• Collision coverage
• Comprehensive coverage
• Accident forgiveness coverage

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.

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