How car insurance premiums are calculated

August 11th, 2014 by admin

Car insurance rates are calculated according to risk, and there are many factors that affect your premiums. Having a clear sense of these considerations may help you lower your rate. Here is a list of components that affect your rate, from the Insurance Bureau of Canada:

  • Where you live: Car owners who live in major cities may have higher rates, due to a higher risk of both accidents and theft.
  • Type of vehicle: Vehicles that offer better accident protection for the occupants and car will lead to lower rates. Newer vehicles may increase your rates because of their relatively higher replacement costs. 
  • How you use your car: The more time you spend driving, the higher your risk for accidents, which correlates to higher premiums.
  • Driving record: Your driving record is a major component insurers use to calculate premiums. Drivers who have long accident-free periods can typically obtain lower rates. For every accident you are at-fault in, your premiums increase. In addition, speeding tickets and other moving violations may increase your rates. However, parking tickets will not affect premiums. 
  • Your statistical group: If a driver belongs to a group that more frequently makes claims, his premiums may be higher, and vice versa. Common statistical groups include drivers in the same age bracket as you or a specified geographic location.
  • Other factors: In addition, market dynamics, government regulations, taxes, discounts and serious events may affect your rates.

For answers related to your auto insurance needs, contact the experts at Fundy Mutual. One of our experienced agents will be happy to help you. We can also help you with your home and commercial insurance needs.