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.
