5 Variables That Affect Your Car Insurance Rate (And 3 That Don’t)
What you pay for car insurance depends on how high is your risk for theft, accidents, and other damages. While a wide range of variables contribute to your risk, auto insurance companies calculate their rates based on a short list of variables. Here are five of the most common factors (and three that may seem like they should affect your rate but don’t).
Insurers Use These Variables to Calculate Your Rates
1. Your Location
Where you live can have a big impact on your car insurance rates. Your environment plays a big part in determining your risks. The following location factors can change your insurance costs:
- Population Density: A higher population means a larger number of drivers. And the more people there are on the roads you frequent, the higher chances of collisions. You’ll pay a lot more to insure your car in the middle of a city than in a rural area.
- Weather: Extreme weather conditions cause vehicle damage and crashes. If you live an area with harsh winters or a severe tornado season, expect a higher premium than if you lived in a temperate climate.
- Crime Rate: While your auto insurance doesn’t cover the contents of your car, the amount of vandalism and car theft in your area can impact what you pay for insurance.
- Road Maintenance: Poorly maintained roads or high levels of construction contribute to accidents (and a correlating increase in insurance rates).
2. Car’s Make and Model
What kind of car you drive has as much impact on your insurance rate as where you drive. Insurers take the following factors about your car’s make and model into account:
- Canadian Loss Experience Rating (CLEAR): Your CLEAR rating is a measurement of how likely your car is to be in a claim and how much the average claim costs.
- Year: As a general rule, newer cars cost more to insure because they cost more to repair.
If you already own a car, you likely can’t do anything about your make and model immediately. But keep insurance rates in mind when you decide to upgrade—a gently used car will be cheaper to insure than a brand new one.
3. Car’s Use
Your risk of being in a collision increases with every mile you drive. No matter how good your driving history is, more time spent in the car translates into a higher rate. To lower your rate, take public transportation to work or fly for your next vacation. Less time on the road means decreased wear-and-tear on your car and a lower insurance premium.
4. Your Driving Record
Your driving history is one of the biggest factors in determining your insurance rates. A parking ticket won’t increase your premium, but these traffic violations will:
- Speeding tickets
- Moving violations
- At-fault accidents
5. Your Demographic
Your statistical group may matter as much as your driving record or location when it comes to calculating insurance rates. If the group you belong in is more likely to file insurance claims overall, chances are you’ll see evidence of it in the form of a higher rate.
. . . But Not These Ones
1. Car’s Colour
For some this may seem like a no-brainer. But surveys show that 40% of Canadians think that the colour of their car affects their insurance costs. Experts suspect this myth stems from the idea that law enforcement notice (and ticket) flashy coloured cars more often than neutral coloured vehicles.
There aren’t any statistics that point to a correlation between colouration and ticketing. And insurance companies and law enforcement have independently denied the connection. Your car’s beautiful red or orange paint job won’t have any bearing on your rates. In fact, insurers don’t ask you to specify your car’s colour in your insurance policy.
2. Car’s Country of Origin
Most businesses will encourage you to buy from local businesses, but your car’s country of origin doesn’t change your insurance premiums. In theory, there is no difference between insuring a foreign car and a domestic one.
Any differences are due to vehicle specifications (see the section on make and model). In general smaller, faster cars are going to cost more to insure. But you can find a car that’s expensive to insure from any manufacturer, based in any country.
3. Your Occupation
Where you work may affect your home or health insurance, but what about auto insurance? Not technically. Your insurer won’t factor in your salary or work history when calculating your rate. But, as stated above, how much you use your car is a determining factor.
So if you use your car for work or you have a longer-than-average commute that may drive up your premium. But it isn’t based on where you work, just how much time you spend on the road.
Car insurance protects you and other drivers on the road. When choosing new car insurance, discuss these factors (and any others that your particular insurer uses) to find out how you can reduce your rates and get the coverage you need.