Factors That Affect Premiums

An automobile insurance premium is developed to reflect the likelihood of a driver being involved in an at-fault accident or having other types of losses. Insurance companies use a number of factors related to the likelihood of loss that are then considered when establishing the appropriate premium for an automobile insurance policy.

The cost of car insurance premiums can vary significantly from one person to another as a result of the use of these factors. The following describes some of the factors that can influence your automobile insurance premium.

Index

 

At-fault Accidents

Insurance premiums may increase when a driver is involved in an at-fault occurrence. Most insurers consider at-fault accidents within the past six to ten years.

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Age

Younger drivers are at greater risk of being involved in an accident. Frequency of at-fault accident declines with age then increases again as drivers advance in age.

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Coverage on Vehicle

  1. Mandatory Coverage

    • Third Party Liability Limit. Higher liability limits result in an increase in premium. The additional premium to increase the minimum $200,000 limit is relatively modest as most claims are within that limit. A large majority of Alberta drivers are insured for at least $1,000,000.
  2. Optional Coverage

    • Deductibles. The deductibles that apply to collision, comprehensive and specified perils coverage represent the amount of a loss for which the policyholder is responsible before the insurance policy responds. A higher deductible reduces premium. In some situations, carrying collision coverage on older vehicles may not be warranted as the cost of the premium could be high relative to the value of the vehicle itself.

    • Coverage for windshield glass can be expensive to purchase. Limiting this coverage can result in lower premiums; this can be done by purchasing an “SEF 13D Endorsement - Comprehensive Cover Limited Glass”.

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Discounts

Most insurance companies offer automobile insurance discounts, though they may vary from company to company. A few examples are:

  • Policyholder has more than one vehicle insured with the same company.
  • Policyholder has both their automobile policy and their property policy insured with the same company.
  • Vehicle is equipped with an anti-theft device. "Top 10 Stolen Cars" is a good reference for information on vehicle theft.
  • Vehicle is equipped with winter tires.
  • Vehicle is hybrid model.

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Driver Training

Lower premiums may be available to those drivers who are newly licensed and have successfully completed a driver training course.

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Driving Convictions

Driving convictions can increase the cost of a driver’s insurance premium. Driving convictions are categorized as minor, major or Criminal Code; the applicable premium surcharge is dependent on the number and type of conviction(s). Insurers consider minor and major convictions within the past three years and Criminal Code convictions within the past three or four years.

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Gender

Female drivers have a lower frequency of accidents and driving convictions which result in lower premiums.

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Lapse in Insurance Coverage

Lapses in insurance coverage of greater than a period of 2 years may affect premium.

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License Suspension

A driver’s license suspension may affect premium, depending on the duration of the suspension(s).

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Marital Status

Marital status can affect your insurance premium. This criterion tends to apply to drivers under the age of 25.

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Mileage

How many kilometers a vehicle is driven may have an impact premium.

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Occasional Operators

Where an occasional driver under the age of 25 is insured on a vehicle, an additional premium may be applicable for third party liability and collision coverage.

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Territory

Where a driver lives makes a difference. Automobile insurance rates are generally higher for those drivers who live in urban areas than those in rural areas. Urban areas tend to be more congested which contributes to a higher frequency of collisions. Higher comprehensive premiums may apply in neighborhoods that experience a higher rate of vehicle thefts and vandalism.

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Type of Vehicle

The make, model and year of vehicle affect a driver’s insurance premium. A classification system ranks vehicles by their claims experience; therefore, the better the claims experience for the particular model, the lower the premium. Before purchasing a vehicle, find out how much it is going to cost to insure. Premiums vary based on the claims experience for the make, model and year of vehicle. "How Cars Measure Up" is a helpful reference to determine the claims experience.

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Use of Vehicle

The use of a vehicle has an effect on insurance premiums (e.g. pleasure only, commuting to and from work, business use).

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Years Licensed

The length of time a person has held their driver’s license can affect premium.

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