How your postal code can affect your auto insurance rate

By Michelle Bates

When you pay your car insurance premium each month, you may wonder how your rate is calculated. There are several factors that influence your car insurance rate, one of which is your home address. And various factors within your area can determine how risky you are to insure.

While you can control some factors that impact your rate, like your driving record, the make and model of your vehicle, and the number of kilometres you drive, you can’t do much to control your postal code.

But rest assured, comparing auto insurance quotes can help you find a lower rate — even if you live in a high-risk location.

How much of a difference can a postal code make?

Where you live can significantly change the rate that you pay for car insurance.

For example, the InsuranceHotline.com auto insurance quoter shows how a 35-year-old male driver of a 2019 Honda Civic with a clean driving record will likely receive a different annual rate when living in downtown Brampton, Ontario, compared to downtown London, roughly 170 kilometres away.

- Brampton (L6Y 1N3): $3,070
- London (N6A 0A1): $1,846

A driver with a Brampton postal code may see a whopping 50% higher premium than a driver of the same profile but with a London postal code.

But the same driver can also see variance within the same city based on their postal code alone.

- Brampton (L6X 0B4): $3,353 (9% higher than L6Y 1N3, just 9 kilometres away)
- Brampton (L6P 0A1): $3,256 (6% higher than L6Y 1N3, just 18 kilometres away)

The disparity in premiums that drivers in Ontario face has attracted public scrutiny and is commonly referred to as “postal code discrimination.” It’s an issue that a number of provincial politicians, including Premier Doug Ford, have promised to tackle.

Neighbourhood risks factor into your car insurance rate

Every city or town has its own collective risk level that it poses to an insurance company. The likelihood of a claim in your area may be predicted by the following factors:

Traffic flow: Cities typically have more traffic than smaller towns or rural areas. That can also mean more entryways from highways, more on-foot traffic, and more opportunities for a collision.

Population: A densely populated area has more potential for claims, even if they aren’t necessarily high cost, than a neighbourhood with fewer residents.

Claims data: If an insurance company has hard data that show they pay out more claims in a certain city, this will increase the risk profile of residents of that city and can impact their premiums. But providers rely on different insights and data when assessing individual driver risk.

Where you park: Whether your home has a private driveway, private garage, underground parking, or street parking can impact your risk of theft or vehicle damage, which can inform your rate.

Crime and theft rate: If vehicle theft is rampant in your area, you may be seen as higher risk. Driving a make and model that thieves target and parking in an insecure location in a higher-crime area can further increase that risk.

Weather: Extreme weather in your city may subject your vehicle to damage and can also be a hazard while driving. In July of 2022, large downpours of hail damaged vehicles in Avonhurst, Saskatchewan. And in 2021, environmental factors contributed to 18% of fatal collisions.

What can I do to lower my car insurance rate?

While a provincial push to end postal code discrimination remains to be seen, there are ways to reduce your risk level — and we’re not talking about upping and moving to a lower risk area just to get a more affordable insurance rate.

If you’re a good driver, opting for usage-based insurance can demonstrate to your insurance provider that your daily driving practices keep you and others on the road safe. You can also speak with your insurance company and see if there’s an anti-theft, security device you can add to your vehicle to curb inflated rates from your area.

Before exploring these options, comparing your current premium with quotes from other providers is the most immediate thing you can do to open the door to potential savings. Each provider will offer a unique rate for your postal code.

Remember, if you’ve just moved to a new home, it’s essential to compare rates for your new neighborhood to get the lowest rate and update your provider on any other details that may have changed in the meantime.

Insurance premiums quoted were generated based on the following driver profile:

- Car make and mode: 2019 Honda Civic DX 4DR
- Purchase date: 2019
- Driver's birth year: 1988
- Gender: Male
- Licence dates: In Ontario, the G licence was received in January 2006, G2 licence in January 2005, and G1 obtained in January 2004.
- Coverage type: Collision and comprehensive insurance (with $1,000 deductible).
- Record: No claims or convictions.

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