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How is Your Car Insurance Premium Calculated?

Find out exactly what goes into calculating your car insurance premium.

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by Team Onlia
These are common questions that every insurance company answers differently, which is why you get a different quote from one company to the next. But knowing what insurance providers look for and how to show them what they want to see can help you secure a lower rate. You may already be taking steps to cut insurance costs significantly.
It’s helpful to know what your insurance premium can be influenced by, whether you’re in the market for a new car, new to the country, or have a young driver you’ll need to add to your policy soon. 

Almost as important as letting you know the factors that determine your rate, is what doesn’t. So let’s get started by clearing up a few misconceptions. 

What doesn’t affect your car insurance premium 

There are myths and half-truths around about what insurance companies consider in determining rates. Let’s put some of those to rest. None of these matter in how much you pay:  

  • Your credit history, including past bankruptcies 
  • Your employment status
  • How long you’ve been at your current address
  • Whether you lease or own your car
  • Accidents where you were not at-fault
  • The colour of your car (unless you drive it to our office, we’ll probably never even know what colour it is)
  • Periods where you did not have auto insurance (depending on the province you’re in)

What does affect your car insurance premium 

Simply put, your insurance rate is based on the risk of you being involved in a collision. Generally, the safer you are as a driver, the less you’ll pay. Here are the significant factors that go into calculating your rate:

Your car

The type of car you have will have an impact on how much your auto insurance premium will be. Its safety rating will be taken into account, as well as the cost to repair or replace it. We’ll also look at how statistically likely it is to be involved in a collision or stolen. 

Your age

In general, seasoned drivers over the age of 25 are more likely to have lower premiums. This is a result of their experience on the road and their lessened probability of being involved in a collision. Gender can also be used to calculate your insurance premium; for example, young women are known to demonstrate less risky driving behaviour than young men, and therefore could be quoted a lower premium.

How often you drive 

Your annual kilometres driven will be assessed – your premium will likely be lower if your daily commute, for example, is shorter. The less often and the less distance you’re driving, the lower the risk is. 

Your driving history

As many drivers are aware, your driving history can have an impact on your insurance rate. The number of convictions due to driving infractions, at-fault accidents, speeding tickets, and the number of years licensed will all be considered; however, it’s good to note that parking tickets won’t be.  Like we always say, better safe than sorry – the cleaner your driving record, the lower your premium!

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Your postal code 

Where you live is another significant factor. The risk in your neighbourhood will be assessed; large urban areas tend to have higher rates, as well as neighbourhoods and cities with high rates of collisions and fraud. While you probably won’t want to relocate for a lower premium, you can shop around to see which providers can provide the most competitive rate if you live in what’s deemed a high-risk area. 

Drivers in your home 

When you have drivers in your home who don’t have their own auto insurance policy, you’ll need to add them to yours. Having other drivers on your policy, especially new or high-risk ones, can impact your rate. 

You do have an alternative in this scenario – you can exclude a driver from your policy, but that means they can never drive your car. If you need to make a claim in a situation where they were driving your vehicle, you won’t be covered under any circumstances. As such, it’s highly recommended that you add any uninsured drivers in your home as an occasional driver at the very least. 

The coverage you choose 

While there is a minimum amount of coverage required to drive in Ontario, there are optional coverages that you can add or remove from your policy. Depending on which additional coverages you choose to add, your premium might change. 

You also have the option to increase or decrease your deductible, which can also affect your premium. The higher your deductible the lower your premium, and vice versa. When you pay more for your monthly premium, the deductible you’ll have to pay when making a claim will be lower. If you choose to have a higher deductible and lower premium, you should be prepared to pay a higher sum when (and if) you need to make a claim. 

Discounts you’re eligible for 

Insurance companies often offer discounts for certain drivers, which can help lower the cost of your premium. Common rebates include discounts for those who bundle their home and auto insurance with one company, multi-vehicle discounts, and discounts for drivers who put winter tires on their vehicle in the winter months.

Government regulations 

Last but not least, there are factors outside of your control that can affect your premium; the government might introduce a new regulation, or the rate of inflation might change. For example, the Financial Services Regulatory Authority (FSRA) approves rates which drivers might see reflected upon their renewal. 

There’s no one deciding factor that decides how much your car insurance premium is. It’s dependent on a number of factors, and your rate can vary from one insurer to the next. When you’re looking for an insurance provider, how competitive their pricing is will be a deciding factor – but we encourage you to look for more than just the most affordable price. 

What cars are cheapest to insure?

You may think about insurance costs before you even buy a car. And that's not a bad idea – car insurance is one the largest purchases Ontarians make each year, with it costing in the thousands of dollars. It's true that some models of vehicles may be cheaper to insure, but your total premium is based on a number of factors.

Cars that may enjoy a slightly cheaper premium include those that have lower estimated repair costs, less claims history (as a model), and higher safety ratings. But just because you purchase a car that ticks these boxes doesn't mean you'll land a cheaper premium – there's a lot more that goes into it, as you now know.

Insurance companies are meant to be your fail-safe in the event of an emergency, and  Onlia’s caring claims process guarantees that you’ll be guided by compassionate people who put their best foot forward when it comes to helping you in your time of need. With us, you’ll also have the freedom to cancel anytime – no strings attached. Life changes fast, and we’ll be with you every step of the way.



Protect your car & home with Onlia Insurance – and get extra discounts while you’re at at.