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January 6th, 2014
How Your Insurance Company Sets its Car Insurance Rates

Why are Insurance Rate Quotes so Different?

If you’ve received quotes for car insurance, you’re probably scratching your head at why rates would be so different. Quotes can vary by hundreds or even a thousand dollars for a one year policy.

Why the differences? Well, each insurance company and their underwriters assess the risk of insuring a specific driver differently.  Insurance companies have a staff of underwriters who investigate the factors that affect the probability of loss, damage, along with costs the insurer may have to pay out.

Here are 6 of the factors insurance providers consider and calculate:

1)   The type of vehicle you’re driving. The make and model of your vehicle varies in the cost to repair it and whether that vehicle is likely to be stolen. The IBC has a list of cars and a rating of them with respect to their cost to insure.

2)   Your driving record. Well, this one is a no-brainer. Those who have had at fault accidents, moving violation convictions, and serious driving offenses such as stunt racing and impaired driving convictions. If you have a criminal record or drunk driving conviction, you may even be denied insurance.3) How often you drive. The more time you spend on the road and the distance travelled, the more likely you are statistically to be involved in a collision.

4)   Where you live. If you live in a congested urban area with difficult driving situations, you’re statistically more likely to be involved in a collision. If there are more cars and trucks on the roads you travel, it stands to reason you are more at risk. With insurance, it is all about risk.

5)   Your age.  Drivers who are very young or very old are statistically more at risk.  At age 25, the rates for car insurance typically fall.

6)   Your gender. Men are considered to be more of a risk statistically, particularly young men. It can be difficult for young men to get insurance.

Denial of Insurance Coverage

You could be denied insurance if other drivers in your household have more than a certain number of at-fault accidents or driving convictions, failed to pay your insurance premiums, or you’ve failed in the past to provide complete information when applying for auto insurance.  A broker can illuminate many of these areas where you could run into trouble. An insurance company themselves may not be willing to be so helpful.

What Insurance Companies Can’t Use

Consumers are often unaware of what might be used to decide their insurability, however here’s a few criteria that cannot be used:

  • Credit history
  • Bankruptcy
  • Length of time you’ve lived at your current address
  • Whether you have a credit card
  • The colour of your car
  • How many not-at-fault accidents you’ve had
  • Whether your vehicle is leased or owned
  • Whether there was a time you had no insurance coverage

Any increases in insurance rates requested by insurance companies to FSCO must be approved by FSCO.

Hopefully, that clarifies the decision making process used by insurers when calculating your auto insurance.  To save money on your insurance, shop around with an insurance broker who has your best interests in mind. Going directly to an insurer is often a mistake.  To lower your rates, choose a car that is cheaper to repair, an older car that doesn’t require collision coverage, one that is less likely to be stolen, and one that is not designed to go extremely fast.  Choose not to drive in the winter where risk is highest and don’t drive to work if possible. Be more conscious of the way you drive, don’t speed, and be even more considerate of other drivers. This is a great way to avoid collisions and thus reduce your risk.

If you have any questions about rates and how your situation is affected, please contact us at 1-888-471-3868. Talk to us now about your car insurance needs.

Infographic: Insurance Rates

car insurance rates

Pinned byKhalid Nobani OntoInformation Design

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