Factors That Affect Premium

An automobile insurance premium is supposed to reflect the likelihood of a driver being involved in an at-fault accident or having other types of losses. Insurance companies track a number of factors related to the likelihood of loss that are then considered when establishing the appropriate premium for an automobile insurance policy. Therefore, the cost of car insurance premiums can vary significantly from one person to another. The following list describes many of the factors that can influence your automobile insurance premium.

At-fault Accidents.

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


Younger drivers are at greater risk of being involved in an accident. Frequency of at-fault accident declines with age; the improvement peaks and frequency increases again in advanced age.


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

  1. If a policyholder has more than vehicle insured with the same company.
  2. If a policyholder has both their automobile policy and their property policy insured with the same company.
  3. If a driver has an anti-theft device installed in a vehicle.
  4. If a driver owns a hybrid vehicle.

Driver Training.

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

Driving Convictions.

Driving convictions can increase the cost of a driver’s insurance premium; the better the driving record, the lower the 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). Rating programs consider minor and major convictions within the past three years and Criminal Code convictions within the past three or four years.


Female drivers have a lower frequency of collisions.

Lapse in Insurance Coverage.

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

License Suspension.

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

Limits of Coverage.

  1. 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. 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.

Marital Status.

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

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.


Where a person 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.

Type of Vehicle.

The make, model and year of vehicle do affect a person’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.

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).

Years Licensed.

The length of time a person has held their driver’s license can affect premium. Premium decreases as years licensed increase.