Car insurance premiums are calculated based on what an insurance company thinks it will have to pay out divided by the number of people paying into the insurance fund. Other factors like administrative costs, overhead and reserve funds are also considered when a company offers a vehicle insurance quote.
Factors That Affect Auto Insurance Rates
What insurers look at when calculating insurance rates is the amount of risk the company is taking on when offering someone a quote to insure a vehicle. By examining certain factors in each case, the company can make a reasonable guess about the likelihood of having to pay a claim. The auto insurance quote reflects the insurer’s risk.
Drivers who live in big cities are more likely to have their car stolen or damaged, or be in an accident than someone who lives in a small village. Thus, city dwellers can expect to pay a higher rate for insurance since the risk to the insurer is much greater.
The type of vehicle being insured is another factor when calculating the insurer’s risk. The difference here is the cost of replacing or repairing the vehicle if an accident occurs.
Risk assessment says that the more time a car is on the road, the more likely it will be involved in an accident. So, drivers who use their car to get back and forth to work will pay a higher premium than a commuter who uses public transit.
As well as the vehicle, the driver is also considered as part of the risk assessment. Certain groups of drivers present different levels of risk. The driver’s geographic location, age and past driving record all factor into the cost of insuring the vehicle and are reflected in the insurance rate quoted.
Ways to Minimize Auto Insurance Quotes
The way to get the cheapest car insurance quotes then is to reduce the company’s risk of insuring the vehicle. According to the Insurance Bureau of Canada, there are a number of ways to reduce the cost of auto insurance.
Shop around: Insurance rates can vary a lot from company to company depending on any of the risk factors discussed. Most auto insurance companies offer free online insurance quotes that makes shopping around easier. Or, consult an insurance broker who will check the markets for the best rates.
Track record: Driving safely to avoid accidents and tickets lowers the risk to the insurance company and will lower insurance premiums too.
Drive less: The less time the car is on the road, the less likely it is to be in an accident. If the vehicle is used to commute to work, consider public transit or other options to minimize driving time.
Vehicle type: Some models of cars are more expensive to replace and repair than others and so the cost of insuring these cars is higher than more popular models. Also, be sure the insurer has the correct Vehicle Identification Number (VIN), since an incorrect number may mean the vehicle is not insured at its proper value.
Drop high-risk drivers: If one or more drivers insured to operate a vehicle are considered high risk because of previous accidents or convictions, the cost of insuring that driver increases premiums. Consult with an insurance agent about removing high-risk drivers from the policy.
Package deals: Most insurance companies offer cheaper insurance rates if auto insurance is bundled with home or other types of insurance from the same company.
Increase the deductible: The deductible is the amount covered by the policy owner in case of an accident. The greater the deductible, the less an insurance company will have to pay out and that reduced risk is reflected in lower premiums.
Drop collision coverage: In the Canadian provinces without government-run insurance companies, vehicles are required to be insured for a minimum amount of liability in case of an accident that causes injury to another person. However, collision insurance, insurance to repair damage to the insured vehicle, is not mandatory. In the case of an older car where repairs might be greater than the value of the car, the collision insurance can be dropped to receive a saving on premiums.
Marianne Lepa - Marianne Lepa is a communications professional with extensive experience in technology and publishing. She is the founder of Arts News ...
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