What drives your auto insurance policy?

June 23, 2022
A happy driver in the car

Do you know exactly what goes into your auto insurance policy? The short answer is, many things. Each and every policy is formed around a number of variables, including some that are simply out of anyone’s control. But what are these variables? And how can they impact your insurance premium? We look under the hood of your auto insurance policy below to see what it’s made up of, and how it can impact you.

What car you drive and how often you drive it

While it's a myth that red cars are more expensive to insure, the make and model of your vehicle can impact your auto insurance premium. Newer models of cars can have more advanced technology, making them potentially more costly to insure.

How often you drive your vehicle may also contribute to your overall auto insurance premium. Drivers who travel long distances frequently for work may have higher insurance rates than those who have shorter commutes. This is because a high annual mileage can increase your chances of a collision or traffic violation.

Your driving experience

Any previous accidents or convictions as well as how long you have been driving for could affect your rates. For example, having a speeding ticket added to your record works against you as it demonstrates that you may be a risk on the road, often resulting in higher auto insurance premiums.

Your location

Did you know that your neighborhood can also be a contributing factor? Due to a higher population, urban neighborhoods can generally have more people on the road, which may contribute to more accidents. On the other hand, drivers in rural areas may have a longer commute to work, meaning they spend more time on the road. Your location and how you use your vehicle can contribute to both higher and lower premiums.

The changing world of insurance

Some factors that can affect your rates are completely out of your personal control. As a result, overall auto insurance claims are becoming more frequent or are increasing in severity. These factors include the following:

  • Rising cost of repairs:  As many parts of the car are now attached to sensors and wires, even a fender bender impacting a car’s bumper can be costly. Depending on the make and model of your car, damage to the added technology can increase repair costs by up to 23%.1
  • Extreme weather changes: In recent years, the change in temperature has contributed to extreme weather changes, with Canada’s climate warming twice as fast as the rest of the world.2 This increase in severe weather has contributed to the damage of homes and vehicles, with $1.9 billion in insured damage accumulating in 2018.3
  • More distracted drivers: There was a 102% increase in the percentage of Canadians that reported texting while driving from 2010 to 20194.
  • Fraudulent claims: Unfortunately, fraudulent claims are on the rise as well. Each year, fraud costs an estimated $1.6 billion in false claims.5 These claims, typically filed for personal gain, cause an increase in rates across the country.

Optional coverage and deductibles

Finding the right coverage for you and your needs can also mean that you have rates you are comfortable with. Adding optional coverage can also cover you in a variety of circumstances, but they can also contribute to a higher overall rate.

Find coverage that works for you

By now, you can appreciate how auto policies are very much like fingerprints in the sense that they are unique to each driver. The goal is to find coverage that meets your needs. Talk to one of our Servus Insurance Services | Home and Auto representatives to find the policy that best fits you.

Disclaimer:

1 Mitchell analysis shows 23% repair price increase between car generations - Repairer Driven NewsRepairer Driven News

2 Canada’s Changing Climate Report

3 Severe Weather Causes $1.9 Billion in Insured Damage in 2018

4 Prevalence and trends of distracted driving in Canada - PubMed

5 IIC - CIP Society Trends Paper | Auto Insurance Fraud

This article is provided for your general information only. Nothing on this site alters the terms or conditions of any insurance policy. Read your policy for a complete description of coverage and contact your insurance provider for coverage and policy details. Policy wording prevails.

Servus Insurance Services | Home and Auto (“SISHA”) is a division of Johnson Inc. (“Johnson”), a licensed insurance intermediary, and is a tradename operated under license in Alberta.  SISHA is not a subsidiary or affiliate of Servus Credit Union. This is not a solicitation by Servus Credit Union.

Home and auto policies sold through Johnson Inc. are underwritten by Royal & Sun Alliance Insurance Company of Canada (“RSA”) in Quebec and underwritten by Unifund Assurance Company (“Unifund”) in the rest of Canada. Auto insurance not available in BC, SK or MB. Home and auto insurance not available in NU. Johnson, Unifund, and RSA share common ownership. Eligibility requirements, limitations, exclusions or additional costs may apply, and/or may vary by province or territory.