Your car insurance covers financial losses due to accidents or theft of the insured vehicle. The insurance also covers expenses that may arise due to third-party losses. The coverage and the conditions will be mentioned in the terms and conditions of your policy whenever you buy car insurance from a reputed insurance company. In Canada, it is mandatory that you have auto insurance if you own a vehicle.
Nothing comes for free. So, you must pay a certain amount of money, either monthly or quarterly or yearly, to your insurance company against your car insurance. This amount is known as premium car insurance.
Today’s article will discuss everything known about car insurance premiums and what factors are considered when deciding on the amount. For the best car insurance policies, you can click on this website.
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What is a car insurance premium?
Simply speaking, a car insurance premium is an amount you pay your insurer for providing different types of coverage for you and your vehicle. This premium must be paid regularly and is commonly paid monthly or in quarterly instalments. However, many people in Canada also prefer paying the premium once per year – known as an annual premium. The average cost of standard car insurance is approximately $1771 per year.
However, the amount depends on the insurance company, your area of residence, the type of vehicle you own, your driving experience and numerous other factors.
How does a car insurance premium work?
Having car insurance is mandatory to financially protect you and your vehicle. In most cases, an insurance policy is valid for a year. Therefore you have to pay your insurance premiums regularly to keep the policy active to continue receiving the coverage.
When researching the different car insurance policies, you also come across another cost – a deductible. Your insurance premium and the deductible are entirely different charges. You only have to pay a deductible if you have filed a claim. This insurance fee will be deducted from the amount your insurance company provides for the claim. Any remaining costs have to be paid by the policyholder.
Factors that determine the car insurance premium
Premium car insurance is determined by several factors such as:
1. Age of the driver or owner
Most automobile insurance companies consider the age of the driver or the vehicle owner to calculate the premium charges. If you are a young driver, you have a higher chance of causing an accident, and therefore you might be charged a higher premium.
2. The vehicle
The insurance premium is different for different cars. The engine’s cubic capacity decides the premium of the third-party coverage. Generally, if the CC of your engine is higher, you might need to pay a higher premium amount. The make and model details are also considered if you select add-on policies.
3. Area of residence
The location where you stay or your vehicle is registered plays a role in determining the premium amount for your car insurance.
For example, if the policyholder lives in a populated city, the premium charge will be higher. This is because there are higher chances of claims due to congestion, vandalism, theft and traffic.
4. Fuel type
Owning electric or CNG vehicles in Canada will attract higher insurance premiums due to higher maintenance costs than their petrol or diesel counterparts. The damage cost of repairing the CNG kit in cars is also high; therefore, premium charges are higher.
5. The age of your vehicle
If you have recently bought a vehicle, you would be looking for more coverage. This is because if the new car is damaged, the cost of repairs will be higher. On the other hand, if you own an old vehicle, the cost of parts and repairs will be much lower than new cars. However, that would depend on the extent of damage too.
6. Driver’s efficiency and experience
The probability of vehicle damage is higher if you are a risky driver with numerous accident reports and traffic violations. So if you try to get an insurance policy, you won’t get any no-claim bonus discount, and you will be paying a higher premium.
7. Coverage type
The Ministry Of Transportation decides the third-party premium charges. However, the premium amount may depend on the insurance company and the discounts they offer if you have comprehensive coverage.
Additionally, premium charges will increase if you buy add-on policies with comprehensive coverage.
8. Deductible
The amount of money you have to pay while making an Insurance claim is known as the deductible. Apart from the standard amount for your insurance, you can also ask your insurance company to increase the deductible.
Your premium charge will be much lower if you have a higher deductible.
9. Credit History
You must have a good credit score and history while applying for car insurance. In most cases, insurance companies consider drivers with lower credit to be high-risk drivers, so they may need to pay a higher premium amount.
How can you save on car insurance premiums?
Even though car insurance can be expensive, there are numerous steps to lower your premium.
1. Ask for discounts
Every insurance company in Canada offers discounts which can lower your premium amount. So while shopping for car insurance, you need to ask each provider about the discount they are willing to offer.
Some of the standard discounts include a good student, participating in a telematics program, an anti-theft system in your vehicle, etc.
2. Check your add-on coverage
The more coverage you have, the higher will be your insurance premium. The type of coverage you select will also impact your premium cost. Most provinces require you to have a minimum amount of liability coverage, and you can also have comprehensive and collision coverage.
3. If you pay your premium in full
You might get a hefty discount if you pay your premium in full. Most insurance companies offer this discount even if they do not advertise it. It can typically save you between 5 to 15%.
Premium car insurance — Endnote
In this article, we have discussed what is a premium in car insurance. There are numerous factors that determine your insurance premium.
The bottom line is that you need to choose the right car insurance policy, and while doing that, you also need to check whether the premium is suitable for you or not.
