How does an insurance company determine what my rate of insurance will be?

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Car insurance companies consider a lot of different factors when calculating rates.  Make and model, including safety options, theft, cost of repairs or replacement and an individual driver’s history can all impact how expensive your payments will be.  If you are looking at acquiring a new vehicle and want to decrease the cost of your car insurance rates, try to look at some of the controllable variables before making a purchase.

Seatbelts optional

One of the most important factors when considering insurance rates is the make and model of your vehicle. Insurance companies generally paint a picture of the driver based on the vehicle you choose; on top of this, theft rates, safety and security of your vehicle and cost to repair and replace are all based on the make and model of your vehicle. These factors have a higher degree of importance than the model year of your vehicle when determining your car insurance rates.

Vehicles that have a higher safety rating generally have lower insurance rates, and newer vehicles are better equipped with safety and anti-theft technology compared to their older counterparts. Remember growing up when seat-belts were new and optional? Today, vehicles tell you when an object has appeared in front of you and has the technology to stop your vehicle before hitting said object.

Insurance companies reward drivers who purchase vehicles with safety-feature loaded vehicles, and provide additional discounts for drivers who purchase safety features such as winter tires.

You have the parts I want

Vehicle theft is more than an insurance problem; the toll on police forces and families is also significant. According to the Insurance Bureau of Canada, vehicle theft costs Canadians close to $1 billion, with $250 million of those dollars going to police, health care and court systems and millions more for correctional services.  With that being said, would you believe that the #1 stolen vehicle in 2016 was actually … a 2003 Ford F350?

Since most stolen vehicles are stripped down and sold for parts, thieves are looking for older vehicles that are popular, accessible and have parts or features that have remained identical over the years. This means thieves are often ignoring the luxury brands in favour of an older Honda Civic.

A vehicle that has an increased rate of theft will also find it accompanying a higher insurance rate.

Where are all the SAAB mechanics?

Vehicle that cost more to repair, or have parts and features that may be less accessible and more expensive, are also at risk of an increased insurance rate. If you drive an older vehicle, chances are the parts required to repair the vehicle are more expensive.

Older luxury vehicles may be especially prone to this issue; not only will it be challenging to find replacement parts and complete necessary repairs, but if your car is damaged beyond repair, finding a replacement model will ensure you’re paying premiums on your rates.

Do we feel safe as a passenger in your car?

Obviously, the most important factor determining your insurance rates are the coverage options you select, along with your individual driving history. If you’ve have multiple tickets for speeding, or other infractions on your license, you will undoubtedly see a reflection of that in your rates, regardless of the make and model of your vehicle.

The takeaway

Every time an insurance company provides you with coverage, they are taking a risk that your or your vehicle will have a claim. Therefore, insurance companies use a complicated algorithm to calculate this risk: it is not always easy to suggest that Paul will have lower insurance if he drives a brand-new vehicle, compared to Mary who may have a less than stellar driver’s history and an older vehicle. While there are many factors that make up the insurance rates, they each contain their own complexities. If you are looking for the lowest available rate, the best option you have is to compare the varying factors against each other with your PAIB insurance broker.