Car insurance premiums can be frustrating. Why are they so high? Why did they change this year? Why are my friend’s rates lower? It can be tempting to choose the lowest price regardless of your coverage which can come back to haunt you in the event of an accident.
Knowing the factors that affect yourcar insurancecan help you make more informed decisions when purchasing and potentially help you reduce your rates.
Insurance companies use statistics to help establish their car insurance rates. Your age sex martial status and more all come into play in a complex algorithm that determines your premium. This can be beneficial to you in some situations but less so in others. This has less impact on your rates than where you live and your driving record.
Where you live has a large impact on your car insurance premiums. For example:
- City drivers pay more than those in the countryside. Why? Because more cars means more traffic and more accidents.
- The weather you experience affects your rates. If you get snowstorms your premiums will be higher as there is an increase in crashes during these weather events. If your area is prone to hail storms your insurance can also be higher or you may have a hail exclusion (to keep rates affordable). You pay more to protect from common weather calamities.
- The amount of crime in your area affects your premiums due to the frequency of break-ins and vandalism putting your car at higher risk.
#3. Driving Record
Your driving record is another major factor in your insurance rates. The tickets you’ve received remain on your record for three years and accidents (at-fault) remain on your record for up to ten years. Some insurance companies are more forgiving and only penalize you for tickets after the second or third. Others will hike your rate with one! W hether it’s your first or third ticket expect a 5% to 20% jump in your annual car insurance premiums.
The impact of your tickets and accidents will vary depending on the insurance company and severity of the ticket or incident. You can learn more about how yourdriving record affects your premiums here.
#4. Insurance History
Insurers like to see a constant insurance history. Periods of being uninsured even if they’re short will result in higher premiums.
The number and nature of claims you have will also impact your rates as will your history with insurance companies. If you’ve ever missed payments or even had a policy cancelled for non-payment you will find that your premiums are higher – you may even find it more difficult to be insured.
#5. The Car You Drive
Another major factor in your car insurance rates is the car you drive. The more expensive it is the more likely it will cost more to insure (as it will cost more to repair or replace). Insurers also use statistics to determine the vehicles more susceptible to theft and accidents which is used in calculating your premiums. There are also some vehicles that are more expensive to repair when compared to their value.
To keep your car insurance rates lower investigate the reliability of the car model and find out whether or not it’s on thetop 10 most stolen list—put out by the Insurance Bureau of Canada. Still you can offset any increases in your premiums by installing a car alarm or other anti-theft features.
#6. Driving Habits
Obviously your driving habits will translate into a good or bad driving history. However there’s another aspect to consider: when and where you drive will also impact your insurance premiums. If you don’t commute to work and only drive occasionally your rates will be lower than if you commute for an hour one way every day. Again insurers use statistics to determine the amount of risk. The more you drive the further you drive and the time of day you drive all impact this and thus your premiums.
#7. Coverage Options
The coverage you choose has a major impact on your car insurance costs. While liability insurance is required by law many drivers choose to include collision and comprehensive coverage to protect themselves in the event of accidents and things like vandalism and fire respectively. Many also choose to add on rental car coverage andother endorsements.
These all come at a cost. That’s why it’s important totalk to a brokerto help you balance your coverage needs and your budget.
Your deductible is another choice that impacts your premium. A deductible is the amount you pay before your insurance kicks in. A higher deductible means you’ll pay more in the event of an accident or claim but you’ll also pay less in premiums. A lower deductible results in you paying less at the time of an accident but more over time due to higher insurance rates.
Many drivers are eligible for a variety of discounts including:
- Accident- and claims-free
- Bundling or multi-policy
- Security/anti-theft alarm
- New business
Discounts vary depending on the insurer so the above list is just a few examples.
Talk to yourindependent insurance brokerto determine what coverage and costs best suits your needs and budget. A broker will also be able to answer any questions you have about your premiums.