means that companies “pool” the money they receive from
you and other drivers they insure. As a policyholder, you are
one member of the risk pool in the company you select as
your insurer.
The cost of all the claims paid out by the insurance company
is reflected in the rates it charges its customers.
The rates charged to individual customers are based on a
number of additional factor.
Factors That May Affect Your Car Insurance Rates
The amount you pay for insurance will depend on factors
such as:
The type of car you drive: Many insurance companies rate
makes and models of cars according to their actual claims
experience, such as the cost of repairs, the rate of injury,
and the likelihood that a particular car may be stolen or
involved in an accident.
Your driving record: The premium you pay for car insurance
also depends on your driving record. This includes at-fault
accidents, the length of time you have been licensed to
drive, whether or not you have taken a driver training
course that your insurance company recognizes, and driving
convictions (such as speeding, impaired or careless driving).
Generally, your first minor conviction will have little or no
impact on your rates. But if you have had a second minor
conviction in the last three years, it will most likely affect
your premium. If you have had at-fault accidents over the
last six years and/or major, serious or a number of minor
driving convictions over the last three years, your premium
will be higher or your insurer may not renew your
insurance. Likewise, the better your driving record, the
lower your premium will be. (Impaired or Careless Driving
convictions are not considered to be minor convictions, but
are major convictions and will impact your insurance premium and whether you are renewed.)
How much you drive: Your car insurance premium will also
be affected by how much you drive. This is because the
more time you spend on the road, the higher the chances
of becoming involved in a car accident. In urban areas,
driving to work may include driving to a subway, bus or
train station. If you live close to work, you will probably
have a lower premium than someone who lives far from
work or who needs to use their car for business.
Where you live: Car insurance rates are generally higher
in larger urban centres. This is because there are a greater
number of cars on the road, and the chances of getting
into an accident are higher. Also, more cars are stolen in
urban areas.
Your age: In general, mature drivers have fewer accidents
than younger drivers, particularly teenagers. Drivers who
are 25 years of age and over can generally buy insurance at
a considerably lower cost than younger drivers.
The amount of coverage: Many people buy additional
protection beyond the mandatory coverage. For example,
if you buy optional Collision coverage which protects you
for damage to your car regardless of who caused the
accident, or Comprehensive coverage which protects you
against theft, vandalism, hail or explosion, your car will be
covered against any such incidences, but you will pay more.
There are also other options such as increasing your Third-
Party Liability protection. All of these optional coverages
will have an effect on the cost of your policy.
Your deductibles: Your deductible is the portion of a
loss that you are required to pay. Your deductible can
vary, depending on the type of coverage you have and
the percentage of fault you are assigned in the event
of an accident. There are deductibles for Collision,
Comprehensive, All Perils and Specified Perils coverages.
You can also pay a lower premium by having a deductible
on Direct Compensation-Property Damage (DC-PD)
coverage, or raising the deductible on the other coverages.
For example, by having a higher deductible of $500,
instead of $300, on Comprehensive coverage you can save
about 10% off of your Comprehensive premium.
These savings are due to the fact that higher deductibles
mean you pay more towards the cost of repairing your car,
while your insurance company pays less toward the total
cost of repair. As a result, your premium will be lower.
If you’d rather have lower deductibles, you may be able to
do so if you meet certain conditions and if your company
offers them, but your premium will be higher. (Recognize,
however, that since Collision and Comprehensive coverage
are optional coverages, your insurance company may
obligate you to carry higher deductibles if you have had
a lot of prior claims.)
If you have an older car, you may choose to reduce your
premium further by dropping Collision and Comprehensive
coverage entirely.
Note: Your insurance company cannot use rating criteria such
as credit history, bankruptcy, employment status, credit
card possession and residence stability, to determine how
much you should pay for car insurance.
Insurance companies use underwriting rules to decide
whether or not to sell car insurance to you. Insurance
companies also use underwriting rules to decide whether
or not to renew your existing car insurance policy, or to
change your physical damage coverage, such as Collision
or Comprehensive coverage.
All underwriting rules used by insurance companies must
be filed with FSCO. Once FSCO has reviewed and approved
these rules, insurance companies may not use other rules
to deny you coverage.
If an insurance company refuses to sell you an insurance
policy, or to renew your policy, the company must advise
you in writing which rule (or rules) it has used to deny
coverage to you.
While underwriting rules differ from company to company,
these are some of the more common rules:
• whether you or drivers in your household have had
more than a certain number of at-fault accidents or
driving convictions;
• whether you’ve had a car insurance policy cancelled
a number of times because you failed to pay your
premium; or
• whether you’ve failed in the past to provide correct
or complete information when applying for car
insurance.
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