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How is car insurance premium calculated?


Several factors go into determining the cost of your car insurance. Insurance companies consider the following 3 factors as most important:

1. Make, model, and year of your vehicle. Insurance companies use the Canadian Loss Experience Automobile Rating (CLEAR) system to price car insurance based on the likelihood that a vehicle will be the subject of a claim and how much it’ll cost to cover the damages. Vehicles that are statistically less likely to be involved in a collision or theft claims (due to built-in safety and anti-theft features) are generally given lower CLEAR ratings than vehicles that are more frequently involved in claims or have fewer safety features. A lower CLEAR rating generally results in a lower premium.

It’s not just about vehicle pricing. A more expensive vehicle that is safer with anti-theft features will be given a lower CLEAR rating than a less expensive vehicle with fewer safety and anti-theft features. If the more expensive vehicle statistically experiences fewer claims and smaller losses it could cost less to insure.

2. Your current address. The city or town you live in (right down to the postal code) can have an impact on your car insurance premium. Drivers in urban areas generally pay more for car insurance because the likelihood of collision or theft claims is higher. Insurance companies assess the claims history of each area to determine how much should be paid by the drivers who live there. As the number of accidents and the cost of claims in any given area increases, premiums tend to increase as well.

3. The driver. This factor is probably the most important of the three. Your driving record can have a significant impact on the cost of your insurance. Things like licence suspensions, parking tickets, and convictions for driving offenses generally result in higher premiums. The length of your morning commute, who occasionally operates your vehicle, and your driving experience are considered when calculating the cost of your insurance.

4. telematics: Most if not all insurers offer you discounts up to 25% if you allow them to monitor your driving electronically. Each company use different menthods to monitor you e.g some of them will install an app on your smart phone, some of them will install a device in your car.

Why did my car insurance company increase my premium?

As the cost of paying car insurance claims increases, so do car insurance premiums. There are likely a number of factors that may have caused you to see a rise in your car insurance recently. While some of these factors may be within your control (like traffic tickets or at-fault collisions), others are industry-wide issues. Insurance companies are working to keep pricing as fair as possible for all customers. Here are two of the major contributors to industry-wide increases in car insurance premiums.

An increase in the frequency and severity of physical damage claims

Insurers are seeing more and more physical damage claims, and the cost of resolving these claims is increasing for several reasons. Many modern vehicles are built with advanced driver assistance systems that involve complex sensors and computerized components, and these vehicles tend to cost more to repair. Distracted driving – also on the rise, leads to increased accidents with more severe damage.

Car insurance fraud

Auto insurance fraud is also a major issue affecting the industry. In Ontario alone, the Insurance Bureau of Canada reports that car insurance fraud costs drivers an estimated $1.6 billion each year (about $236 per driver).Insurance companies are working to reduce instances of car insurance fraud and minimize the impact they have on customers.

Every situation is unique. If you have questions about your coverage or your premium, you can contact us.

Three ways to reduce your premiums

Now that you are aware of the basic factors that determine car insurance premiums, you may be wondering what you can do to decrease that cost. Here are three ways to start saving today:

1. Discounts: Talk to us and find out if you qualify for any of the top 10 car insurance discounts available in Canada. You might be surprised how much you could save, especially if you’re eligible for multiple discounts.

2. Higher deductible. Opting for a higher deductible will invariably lower the cost of your insurance. But first to make sure a higher deductible is right for you.

3. Get educated. When it comes to saving on car insurance, understand your options. Learn more and pay less.

Next time you’re shopping for a new vehicle, get in touch with us before you seal the deal. We can suggest the right insurance coverage for the best price. We can also help you compare prices for the models you’re considering so there won’t be any surprises when it’s time to insure your new vehicle. If you’re shopping for insurance and would like the advice please give us at Aaxel Insurance a call 905-362-8080

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