How car insurance rates are determined
The Car You Drive
Yes, the type of vehicle you drive is, not surprisingly, one of the top factors in your rates. Most people know this, but may not understand which cars are more or less expensive and why. Every car is rated for the likelihood of a crash as well as for the likelihood of people being injured in a crash. They are also rated for how likely it is that the car will be stolen. Thus a car that falls on the list of most-stolen will have higher rates. Cars with very powerful engines, which can be dangerous in the hands of less experienced drivers, will also see higher rates. And of course the more valuable you car is, the more it will cost the insurance company to replace or repair it; thus the insurance rates will be higher.
Safety plays a role in this as well. Cars with higher safety ratings are less likely to result in serious injuries in an accident. This means the insurance company has a lower risk of paying out on large injury claims. Choosing a safe, moderately priced car with a low likelihood of theft is a good way to get a better rate.
Your Driving Record
You probably know that your driving record has a big impact on your rates. Good drivers get the best rates because they represent a lower risk of a claim. If you have a ticket or an accident for which you were at fault on your record, you will pay a higher rate than someone with a clean record. There is a limit to how long the insurance company can rate you at a higher premium for tickets and accidents, so you will not have to pay the increased premium forever.
Some insurance companies offer ?accident forgiveness. which generally means they will not increase your rates for the first accident. It is important to read the fine print to understand the limitations of this feature on your car insurance.
of your driving record makes a difference as well. Experienced drivers will see better rates than inexperienced ones, because they have so much practice on the road. This decreases their odds of an accident and means they are a lower risk for the insurance company.
Where You Live, Where You Drive
It often comes as a surprise to people that the place where they park their car at night has an impact on their car insurance rates. Why does it matter where you live? Car insurance companies use statistics on car theft and how common accidents are in each area to determine the risk of insuring a car that is parked or garaged in that area. Thus your postal code has an impact on your rates.
And it is not just where you park, but where you drive every day that makes a difference. A car that you commute in costs more to insure than a car you drive occasionally. And a long commute often translates to a higher rate than a short commute. The more time you spend on the road, the more your odds of an accident increase. The insurance company rates your policy based on this risk level.
The Best Rate for You
Each insurance company determines their own rates (within the confines of legally defined minimums and maximums in certain provinces) and decides how much weight they will put on each of the factors. This means that while one insurance company may charge more in your postal code, another may not. One insurance company may charge more for sports cars while another offers lower rates on them.
The key to finding your best rate is to shop around for car insurance. Compare rates to find the company that is best suited to your needs and offers the best rate for your situation. Fortunately, the internet makes it easier than ever before to shop for. and find. your best auto insurance rate for your driving profile.