How Insurance Premiums Work

Insurance premiums are based on statistical information of claims. If the postal code you live in has a higher claims ratio then the next, your premium will be affected.  In order to solve this issue, look for insurance at many different companies. Some companies may have higher claims ratios in certain areas then others. Ex: Intact Insurance may have more claims in the L5M area compared to Aviva Insurance. Aviva will offer the better price for that postal code.

Here is a list of things that will affect your premium in a negative way:

1) Your Commute. Your commute to work is a big deal. It’s common sense that the more you are exposed to a risk, the greater the chance of it happening. If you drive an hour everyday to work, traveling over 50 kilometers each way, your chance of getting into an accident is much higher. Premiums must be adjusted for this.

2) Buying a New Car. When purchasing a brand new car, your likely to lease or finance. The dealership requires you to purchase full coverage (collision and comprehensive) along with third party liability in order to protect their share of the asset…meaning you can’t just choose one or the other and lower your premium. A new car is also worth more money then a used car and will be more expensive to replace.

3) Insurance Gaps. This is huge. Maybe there was a time when you figured you don’t need insurance for 3 months because you decided you rather take the bus. What may seem like a bright idea actually isn’t. If your an insurance jumper…companies don’t want you. If the company underwriters detect that there was a time where you were fully licensed, had a car and didn’t have insurance for whatever reason…your wallet is in trouble. As for the aforementioned example, to solve this you can purchase an OPCF 16 (Suspension of Coverage), which is an endorsement giving permission to suspend the coverage of a described automobile until stated.

4) Tickets and Claims. As we all probably know, tickets and/or claims (at fault or not at fault) will have an impact. In order to solve this, purchase an accident waiver (for great drivers) or accident forgiveness which will lock your insurance premiums after your first claim.

5) Decreasing your deductibles. Whats a deductible? This is the portion the insured client will pay if a claim were to occur. When purchasing insurance for your car, you will be asked if you want full coverage (collision and comprehensive) which is insurance for damages to your own vehicle. If you do, the standard deductibles will apply which are $500 for collision and $300 for comprehensive. You now have the option to either increase these deductibles, or decrease. Decreasing them to zero, will raise your premium while increasing them will lower your premium price. Your broker will analyse your situation and decide which deductible is best for you.

These are some of the many things which affect your premiums. I will have more factors which increase premium in future blogs. Talk to your broker if you have any concerns regarding your current insurance. Feel free to contact me with any questions as well.