Understanding How Car Insurance Rates are Calculated

The Good news is that many Ontarians have received a bit of relief on their car insurance premiums since the start of the COVID-19 pandemic. It’s not much to be sure, the average rate in Ontario dropped by 3.8% province-wide. The reason for the dip was the large numbers of people working from home and the drop in accident claims.  Unfortunately, as we move towards a full re-opening, insurance rates are expected to rise with more people back on the road.

Ontario has consistently had some of the highest auto insurance rates in the country, and rates can vary wildly from one neighbourhood to the next, leading many drivers with good records to wonder why their rates are so high. The information in this post can shed some light on what insurance companies base their rates on.

Your Personal Profile

Insurance companies base their rates on risk. For auto insurance, they basically consider two factors: what is the likelihood they will have to pay a claim and how much would a claim cost them. 

When you get a car insurance quote, part of their decision is based on your driving history. The insurance company will look at your driving record for any traffic violations, at-fault accidents claims, if you’ve taken any driver training, how much driving you do, etc. 

They also consider your personal status as well, including:

• Where you live – If you live in a neighbourhood with a lot of car thefts, your rates will be higher than if you lived in a building that offers Toronto valet service.
• The amount of driving you do – The more driving you do, the higher your risk of an accident.
• Your age and marital status – Older drivers and married drivers generally pay less for car insurance because older drivers tend to have more driving experience and both older drivers and married drivers are considered less likely to drive recklessly.

The Type of Car you Drive

Like they do with drivers, insurance companies assess the risk associated with your vehicle., 

Luxury cars are more expensive to insure because they are more likely to be targeted for theft and they are more expensive to repair or replace. Insurance companies look at historical data gathered by insurance associations as well as the statistics they’ve gathered over the years related to each type of vehicle and claims that have been paid out for them.

You can check out the Insurance Bureau of Canada’s annual “How Cars Measure Up” report to find out the stats on insurance claims by vehicle make and model.

The Type of Coverage you Buy and the Amount of your Deductible.

If you choose more than the mandatory minimum liability insurance and opt for coverage for at-fault and hit-and-run accidents and/or decide you want a lower deductible (the amount you have to pay out of pocket for a claim), your rates will be higher.