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Factors That Influence Auto Insurance Rates

If you caught our post on factors that influence property insurance rates, then you already know about actuarial science, which is a combination of math and statistics used in insurance to assess risk levels. This method is also used to determine rates for auto insurance. Do you ever open your policy documents and think to yourself “What determines my auto policy premium?”. Well, it’s a combination of things. Some of them you may not even realize affect your rates. Want the insider scoop? Keep reading!

  1. The vehicle you drive 

    Your insurance company will gather statistics (using actuarial science) on your exact year, make and model of your vehicle and base your annual insurance premium on the information they find. Things like how often people who drive the same vehicle as you get into accidents (also whether the driver is male or female, as well as their age), or the number of thefts or vandalism claims submitted for your vehicle model. The cost/availability of parts, replacement value or resale value of your vehicle also play a factor in your rates. You can always do some research before buying a car to see what information you can find regarding how pricey the model you’re looking at is to insure. 

  2. Where you live

    Your address (more specifically your postal code) is another determining factor in how your premium is set. Much like with the vehicle you drive, insurance companies will analyze the same type of information (frequency of accidents, claims, etc) for your specific postal code. If they find that where you live pairs up with a high number of unfavourable statistics, your premium will increase. They also take into consideration where you drive your vehicle most frequently and where you park it when it’s not in use. 

  3. Convictions /tickets 

    Speeding is probably the most common conviction drivers are charged with when pulled over by the police, but did you know that you can also be convicted for charges such as driving without your insurance pink slip in your vehicle, or for having defective brakes or a vehicle that makes unnecessary noise? Convictions range in severity. The more severe the conviction, the more it can affect your premium, so much so that you may even be surcharged (a percentage of your premium) by the insurance company. These convictions also stay on your driving record and affect your payments for 3 years and can also classify you as a high risk driver, which will limit the number of insurance companies you can be placed with.

  4. Claims 

    Much like tickets, claims are another factor that heavily affect your premium. The more accidents on your record that are your fault, the higher your premium will go. These can affect your rates anywhere from 6 years and on, and the more claims you have, the higher the likelihood that you will be considered high risk, much like with tickets. Keep in mind that we’re talking about at-fault accidents. If you are involved in an accident that isn’t your fault, then you will not be held liable and your rates won’t increase.

  5. Age, gender, and martial status 

    Though these criteria may seem unfair to some, remember that everything that helps determine your insurance rates are based on statistics. It has been proven that younger, less mature drivers tend to get into more accidents than older drivers, and statistically younger males are more careless when driving than younger females. Insurance companies even take into consideration whether you’re single or married. You may be reading this and thinking “I’m young but I’ve never been into an accident or been pulled over for a driving violation before!” or “I may not be married, but that doesn’t mean I’m not a good driver!”. This may be true for you, but statistics don’t lie.

  6. how you use your vehicle 

    Do you drive to work or school daily? If so, are you down the street or across town? Or do you work from home, and only use your vehicle for pleasure? This information is relevant because the more you drive, the bigger the risk for accidents. 

  7. The numbers of years you’ve been continuously licensed and insured 

    Do you have a G1, G2 or G license? And for how long? The longer you are licensed without interruption and the more experience you have, the lower your prices will be. For example, if you let your license expire for a period of time over 3 years, you will have to start from scratch as a new driver with a G1. Along the same lines, the number of years you have had continuous insurance impacts your price positively the longer you’ve been insured because you have established a track record of having insurance without claims which gets you lower rates.

The contributing factors to your auto insurance premium is quite detailed, as you can see, and using statistics is the fairest way to establish rates for millions of drivers across the province. If you have any questions about your auto insurance policy, please feel free to reach out to InsuranceHero.ca and we will be more than happy to provide additional details. We’re always here to answer any questions that you may have.


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