Auto Insurance – If you’ve ever moved from one city in the GTA to another and saw your car insurance rate suddenly jump by 25% or more, you’re all too familiar with ‘postal code discrimination’ – the fact that all drivers living in a certain neighbourhood automatically pay more for car insurance simply for living there.
This issue was pulled into the limelight recently when Ontario Premier Doug Ford made headlines by announcing that insurance rates based on a driver’s postal code are “..going to come to an end really quickly.” Ontario auto insurance can vary depending on several factors, including your driving record, vehicle type, where you live, and the coverage you purchase. It is essential to shop around and compare quotes from different insurance companies to find the best range at the most affordable price.
While this does sound more equitable, an overhaul to the insurance system will take time, and it will likely take a lot longer before anyone’s insurance rates go down.
“So, in the meantime, read this post for a breakdown of how insurance rates are calculated in Ontario and maybe you’ll see an opportunity to reduce your premiums.
Why your postal code affects your insurance rates
In a nutshell, insurance companies base their rates on how likely they think it is that they’ll have to pay a claim on your vehicle and how much they think that claim would cost them. They use historical data and statistics on the type of vehicle you drive and information about you personally to calculate your premium.
Taking a closer look, your personal profile includes:
Your driving record
Your driving record. A minor traffic violation remains on your record for three years, an at-fault accident for five years and a serious conviction (DUI, careless driving, etc.) for ten years. The volume and type of entries on your record have an effect on your rates, as does the number of years you’ve been driving and whether you’ve taken any driver training.
Where You Live
I.e., your ‘postal code.’ The reason everyone in certain neighbourhoods and cities in the GTA pays more for auto insurance is based entirely on historical data. If you live in a neighbourhood that has more car thefts and accident claims, you will pay more. On the other hand , if you live in a condo with an underground garage that uses a Toronto valet parking service, you’re likely to pay less because your car is shielded from the elements and in a secure facility.
Other personal factors
This includes your age, marital status, children, etc. These factors are also based on statistics. Older drivers are thought to be less likely to drive recklessly. This is why insurance rates typically drop after a driver has turned 25 and again when they turn 40. Drivers that are married and have children also tend to pay less for car insurance for the same reason.
The amount of driving you do also has a significant impact on your risk profile and therefore your insurance rates.
Your vehicle information
The other major factor insurance companies consider when setting your rate is the type of car you drive. They use the Insurance Bureau of Canada’s annual “How Cars Measure Up” report, or a CLEAR score (Canadian Loss Experience Automobile Rating), and their own historical data to help them determine auto insurance rates.
These reports tell them which vehicles were stolen most frequently, which vehicles were involved in the most accidents, the average cost per claim of each vehicle, etc. Where your vehicle lands on those lists, along with your personal information, is generally what insurance companies use to ‘predict’ how likely it is that they would have to pay a claim on your behalf and, on average, how much that claim would be.
Other factors that impact car insurance in Ontario
Other factors that affect your insurance rates include the amount of coverage you buy, your deductible and the age of your vehicle.