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How insurers calculate auto insurance rates in Ontario

Ever wonder how your car insurance premiums are calculated? In Ontario and beyond, car insurance providers use complex algorithms based on a plethora of factors to determine each driver’s unique insurance rate. There are basically four main categories of consideration that go into calculating your personal auto insurance rate.

1. Your driving profile

This is the most important thing, and the one that you have the most control over. Your driving profile includes elements such as your:

• Driving record: the cleaner the better
• Insurance and claims history
• Marital status
• Where you live: auto insurance is more expensive in some neighbourhoods and cities than others
• Age: generally insurance decreases after the age of 25
• Driver’s licence class
• Average daily commute: the more you drive, the more you pay
• Personal or business use
• Eligibility for discounts such as claims free discount, alumni and professional association discounts, seniors discount, etc.

2. The vehicle you drive

The make and model of the vehicle you drive play a crucial role in the cost of your Ontario auto insurance. The main reason is how susceptible your vehicle is to theft. Auto theft is a huge problem in Ontario and across the country, with certain vehicles being more prone to theft—and thus insurance claims—than others. If you drive one of Ontario’s most frequently stolen vehicles it’s likely this will be factored into your premium.

Auto theft is frequently tied to auto insurance fraud, which is one of the driving factors behind increasing insurance rates. Insurance companies are constantly paying out claims related to stolen vehicles that wind up being related to a greater fraud scheme, and that cost is once again passed on to consumers through overall higher insurance premiums.

One way to reduce your car insurance rates is to purchase a car that’s cheaper to insure. According to InsuranceHotline.com data, this includes vehicles such as Volkswagen Golf, Chevrolet Cruze and Toyota Camry.

If you’re in the market for a new vehicle, using the car insurance calculator is one way to figure out what your insurance premiums might be.

3. Additional auto insurance coverages

The amount of insurance coverage you get also comes into play. In Ontario, drivers legally need to have at minimum the following coverage:

• A minimum of $200,000 in third-party liability coverage – Protects you in a lawsuit if someone is injured, killed, or their property is damaged
• Statutory accident benefits coverage – Provides you with medical benefits in the event you are injured in a car accident, regardless of who is at fault
• Direct compensation – Property damage (CD-PD) coverage – Covers damage to your vehicle in the event someone else is at fault
• Uninsured automobile coverage – Provides coverage in the event you, or someone in your family, is injured or killed by an uninsured motorist or in a hit-and-run

While this is the standard amount of coverage, many motorists opt to increase liability coverage to a minimum of $1 million. There are also additional types of insurance you can add on to your policy for additional coverage, including extra vehicle protection:

• Specified perils or comprehensive auto insurance coverage – Protects against named perils such as fire, theft, hail, lightning, or all available perils, depending on the comprehension of the policy
• Collision coverage – Covers damages/losses to your vehicle when it’s involved in a collision with another vehicle or object

There’s also additional optional medical benefits protection you can get, some of which includes:

• Income replacement benefits – Provides payout if you cannot work as a result of an accident. Various levels of coverage are available
• Death and funeral benefits – Provides additional payout to family members to help with expenses in the event you are killed or die as a result of an automobile accident
• Medical, rehabilitation and attendant care benefits – Extended medical benefits in the event of a catastrophic injury 

The Ontario car insurance calculator factors standard mandatory coverage into the quotes, but your quote may change if you opt to add these or other optional benefits to your car insurance policy.

4. Your insurance company

Just as insurance providers look at your claims history, they also take into consideration their own. If they had to pay out a lot of money in claims in the previous year, for example, then their rates may increase overtime to offset these expenses. Unfortunately, these costs get passed down to drivers through increased premiums.

Insurance companies base your rates on your driving record in combination with their experience in insuring drivers with similar driving profiles to yours. Your level of risk is based in part on associated risk.

How is it that I can be with the ‘wrong’ insurance company?

No single company offers the best car insurance rate for everyone. As you can see, there’s a lot that goes into calculating an auto insurance rate—and every insurance company calculates their rates differently based on these factors.

It often boils down to the insurer’s own claims experience and it’s safe to say from this standpoint that no two insurers are alike. Furthermore, an insurer’s claims experience will change over time. So even if you were with the ‘right’ company three years ago, they could be the ‘wrong’ company for you today.

Comparing your rates regularly using a car insurance calculator is the best way to ensure you’re still paying the best rates. Save time and money with InsuranceHotline.com’s car insurance calculator.