Risk Plays a Factor in Your Car Insurance

What Do You Know about Car Insurance?

November 6, 2024

Do you know how your car insurance is determined?

Insurance companies look at different factors to assess your risk level as their customer when setting your car insurance rate. When you are shopping for car insurance, it’s important to understand the different risk factors so you can make an informed decision and get the best rate possible.

What affects car insurance premiums?

Driving record: Clean records typically lead to lower premiums.

Vehicle type: More expensive or less safe cars can increase rates.

Location: Higher crime or accident rates in your area can raise premiums.

Credit score: In many provinces/territories, insurers consider your credit history.

Age and gender: Younger drivers or males often face higher rates due to statistical risk.

Driving distance: How you use your car is also an important factor. For instance, the number of kilometers you drive and whether you use your vehicle for commuting or just running errands can impact your insurance rates. Generally, those who drive less tend to pay lower premiums.

Deductibles: The amount you pay out of pocket before insurance kicks in. Higher deductibles can lower your premiums, but you'll pay more in the event of a claim.

Policy limits: These are the maximum amounts your insurer will pay for a claim. It's essential to choose limits that adequately cover your potential liabilities.

Discounts: Many insurers offer discounts for safe driving, bundling policies (like home and auto), good student discounts, and more.

Types of coverage:

Third-party liability insurance

It is mandatory in Canada to carry third-party liability coverage. By law, you must carry a minimum of $200,000 in third-party liability coverage, but you can choose to increase the minimum amount.

Third-party liability insurance covers losses, such as injury or death that your vehicle causes to other people. It also covers damage your vehicle causes to other vehicles. You cannot legally drive in Canada without this type of insurance.

What else is usually required?

Accident benefits: Also required in most provinces, this coverage pays for medical expenses, rehabilitation, and income replacement for you and your passengers, regardless of fault.
Uninsured motorist coverage: This protects you if you’re in an accident with a driver who doesn’t have insurance or whose insurance is insufficient.
Direct compensation: Property Damage (DCPD): It’s now optional in Ontario. It covers damage to your vehicle and its contents when another driver is at fault.

Each province may have additional requirements or optional coverages, so it’s important to check the specific regulations in your province or territory.

Optional coverages: Collision insurance helps cover repairs if you collide with another vehicle or object. Comprehensive covers repairs that do not result from collisions such as theft, vandalism, animal damage, and fires.

I have a car loan. What car insurance coverage do I need?

If you have a car loan, you’ll typically need the following types of insurance coverage:

Liability insurance: This is usually required by law. It covers damage you cause to others in an accident.

Collision coverage: This is often required by lenders. It covers damage to your car from a collision, regardless of who is at fault.

Comprehensive coverage: This protects against non-collision incidents, such as theft, vandalism, or natural disasters. Lenders may require this as well.

Personal injury protection (PIP) or medical payments coverage: Depending on your province, you may need this coverage to pay for medical expenses for you and your passengers.

Uninsured/underinsured motorist coverage: While not always required, this coverage can protect you if you’re in an accident with someone who has inadequate insurance.

Review annually

Your needs may change, so it's a good idea to review your policy and coverage annually to ensure it still meets your requirements.

Shopping for car insurance can be overwhelming, our Western Financial Group ca insurance experts can do the shopping for you and compare quotes from multiple insurers to find the best rate and coverage for your needs.

Bundle and Save, give Western Financial Group a call 1-866-860-1958.