Whether you’re thinking of buying a new vehicle or just shopping around for a new car insurance provider, it helps to understand how insurance companies determine the amount you’ll pay for coverage.
How are car insurance premiums calculated?
While there are several factors that go into determining the cost of your car insurance, here are three of the most influential things insurance companies consider:
It’s not just about price. A more expensive vehicle that is safer and harder to steal may be given a lower CLEAR rating than a less expensive vehicle with fewer safety and anti-theft features, even though the more expensive vehicle would cost more to replace. If the more expensive vehicle statistically experiences fewer claims and smaller losses (and, as a result, gets a lower CLEAR rating) it could cost less to insure.
Why did my car insurance company increase my premium?
If the cost of your car insurance has recently gone up, there are likely a number of factors that went into determining your new premium. While some of these factors may be within your control (like traffic tickets or at-fault collisions), others are industry-wide issues that insurance companies are working to address to keep pricing as fair as possible for all customers. Here are two of the major contributors to industry-wide increases in car insurance premiums.
Insurers are seeing more and more physical damage claims, and the cost of resolving these claims is increasing for several reasons. Many modern vehicles are built with advanced driver assistance systems that involve complex sensors and computerized components, and these vehicles tend to cost more to repair. Distracted driving is also on the rise, which leads to increasing accidents with more severe damage. As the cost of paying car insurance claims increases, so do car insurance premiums.
Car insurance fraud is also a major issue affecting the industry. In Ontario alone, the Insurance Bureau of Canada reports that car insurance fraud costs drivers an estimated $1.6 billion each year (or about $236 per driver). Insurance companies are working to reduce instances of car insurance fraud and minimize the impact they have on customers.
How can I reduce the cost of my car insurance?
Next time you’re shopping for a new vehicle, give Absolute Insurance Brokers a call at 1-877-941-2266 before you seal the deal, so there won’t be any surprises when it’s time to insure your new ride.