We help explain how car insurance works, how premiums are calculated, and what to know about your insurance policy
Auto insurance is one of those things many drivers don’t normally think twice about. Most of us visit the driver’s centre once a year, and some don’t even do that with the advent of online quotes for car insurance offered now by most major companies. Considering its importance, here is a basic introduction and some interesting facts regarding coverage in Canada.
How it works
Have you ever wondered what happens to the premiums you pay? That money is pooled together and is used to cover the claims of people falling victim to things like vandalism or who are involved in collisions. Because it is an annual contract, your premium fluctuates a bit every year depending on the insurance companies’ evaluation of how much money they need to cover the upcoming year’s claims.
How are premiums calculated?
There are some differences that vary depending on the province and provider, but your premium is basically calculated by how likely you are to make a claim. Factors include the demographic you belong in, what type of vehicle you drive and your past claims history. As consumers, the way we find out how much we need to pay is changing as well, again thanks to the Internet. The ability to get online quotes for car insurance has made shopping around for coverage as easy as turning on a computer.
Understanding your policy
There is no one-size-fits-all for coverage, and insurance only pays for types of losses specified in your contract so it is important to read and understand your policy. As convenient as getting online quotes for car insurance can be, make sure to call and talk to a representative if you have any questions about what is and isn’t covered.
Car Insurance Facts and figures
• Based on a seven-year national average from 2004 to 2010, 53.1¢ went towards fulfilling claims, 15.9¢ to the government through taxes, 20.5¢ to industry operating and regulatory costs and 10.5¢ to industry profit.
• Contrary to popular belief, red cars don’t cost more to insure. Premiums can take into account the model (including whether it is a two door or four door) and year of the vehicle, but not the colour.
• Parking tickets will not affect your insurance rates, as it is a violation committed while you’re not actually operating your vehicle. However, excessive speeding tickets can, since it can indicate a pattern of risky driving behaviour.
• On average, men can pay anywhere from $500 to $2,500 more than women for auto insurance. Both sexes under the age of 25 pay much more than more mature drivers.
Now that you know a bit more about car insurance in Canada, it’s time to do some shopping. Companies can be highly competitive when it comes to rates, so doing a little research now can mean big savings later when it comes time to actually pick a provider.