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Calculating insurance premiums

The cost of your car insurance in Canada is determined by several factors. When you obtain a new insurance plan, your insurer takes these factors as they pertain to you and your situation into account to establish the level of risk you represent. The more money you are statistically likely to claim in indemnities during the year, the higher your premiums will be.

The Main Factors that Determine Your Insurance Premiums:

Your vehicle – Sports cars and luxury cars and SUVs generate higher insurance claims, and thus higher insurance costs. These vehicles rate highly in car theft statistics and are more expensive for insurers to repair or replace. In addition, certain vehicles have better safety ratings than others, which means they pose a lower accident risk and generate lower claims costs in the event of an accident. In Canada, the CLEAR (Canadian Loss Experience Automobile Rating) system is used to precisely evaluate the risk posed by each vehicle model.

Where you live – Car theft is more prevalent in large cities like Montreal, Toronto or Vancouver. If you live in an area with high theft rates, you are more likely to make a claim at some point. The cost of your car insurance will therefore be higher.

Your driving record – Safe driving pays off! The best way to avoid having your premiums increase is to avoid being involved in an accident. Your premiums should not increase if you are involved in an accident for which you are not responsible. In contrast, driving infractions such as speeding, failure to wear a seatbelt or driving under the influence of alcohol all contribute to increasing your premiums.

The use you make of your car – You are at greater risk of being involved in an accident if you drive your car frequently, for example if you use it to commute to work. The more kilometers you drive on average per year, the higher the cost of your car insurance.

Your age group – Insurers also take into account the demographic group you belong to when calculating the cost of your car insurance. If your insurer determines that your age group, in the region where you live, does not represent an elevated risk of making a claim, your car insurance premiums will be lower.

TAKE NOTE! - The principal factors that determine your premiums are under your control; these include the car you choose to buy and your driving record. If you want to keep the cost of your car insurance at a reasonable level, it’s important to drive carefully, and choose a car that is right for your needs and your budget. For more ideas on how to reduce your car insurance costs, visit our section on car insurance reduction tips.