Automobile insurance is mandatory in Ontario. If you are cited for driving without insurance you may have your license suspended, your vehicle impounded, and going forward, you may have trouble finding an insurance company that will agree to insure you for a decent rate.
There are many factors that affect your insurance premium. Knowing how your rate is calculated may help you save some money as you will be able to shop around for a better rate when it comes time to renew.
It is important to note that insurance premiums in Ontario are regulated by the Financial Services Commission of Ontario, also known as the FSCO. The FSCO is a regulatory branch of the Ministry of Finance that was established to protect the public from unfair or fraudulent practices. These regulations are in place to give us confidence when purchasing insurance.
Should an insurance company want to raise their basic rates, they must submit a request to the FSCO for approval. The FSCO will then consider the insurer’s rationale to determine whether the increase is justified or not. Insurance companies can submit their requests quarterly and, if approved, will take effect when your policy renews.
Car insurance premiums vary based on several factors, from your driving record, age, and demographics to how you drive your car, the coverage you choose, and even the insurance company you opt to do business with.
To better illustrate these aspects, let’s break things down a bit further:
Your driving record, your age, and where you live all have a significant effect on insurance rates. Some of these considerations are related to your driving and some are not.
The type of vehicle you drive, along with how you use it on a daily basis has an impact on your insurance premiums.
The amount of coverage you choose will have a direct impact on how much you pay. Many insurers recommend carrying $1 million in third-party liability with most opting for $2 million.
Beyond third-party liability, you may choose accident, theft, injury, loss or damage, collision or comprehensive coverage. If you purchase a new vehicle, your financing may require you to purchase a comprehensive policy that protects you against all perils.
All insurance policies carry a deductible amount, which is the amount you will be out-of-pocket for should you need to file a claim. Most policies come with standard deductibles in the range of $300 – $500 per incident, but you may have the option to raise the deductible.
Raising your deductible to $1000 could lower your premiums by 10 percent or more. Speak to your insurance carrier directly to find out what your options might be.
As you are shopping for rates, you may notice that your quote will vary from one insurance provider to another. This is because the insurer pools its insured into “risk groups”. The more claims experience they have with a certain risk group, the higher the premiums will be. This is estimated by projecting the estimated cost of future claims based on this experience.
So, now that we know the factors insurance companies consider when determining your auto insurance premium, let’s have a look at the factors they can’t use against you:
This includes at-fault accidents where you were less than 25 percent responsible. This also includes at-fault accidents that did not result in a claim or where the damages were less than $2,000.
Meaning accidents you were involved in but were not responsible for in any way.
Your credit history does not affect your insurance premium. Bad credit, no credit, no credit card or a bankruptcy are not factors insurers can consider. However, if you have a history of missing insurance payments, you will likely pay more.
Whether you own or lease your car is not a consideration.
Additionally, if there was a period of time when you were uninsured, an insurer cannot use this as a factor in determining your rate unless your uninsured time was the result of a cancellation.
In conclusion, there are many factors that insurers consider when calculating your auto insurance premiums. Therefore, it always pays to shop around. Be sure you are getting the coverage you need and always make safety a priority.
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