Your car insurance premium: What goes into pricing and how you could save more
As the cost of living always seems to be on the rise, it makes sense to try and save where you can. Fortunately, we’re here to help you lighten a bit of that financial load. Let’s dive into how car insurance is priced (your premium isn’t just pulled out of thin air!). Then, we’ll look at ways you could possibly lower your premium. With a few tweaks, you might be able to pay less without sacrificing the coverage you need if something unexpected happens.
Factors that influence your auto insurance premium
There’s a whole host of factors that influence the cost of insurance. Here are some key ones that shape your premium:
- Your driving history: Insurers generally check your official driving record through your provincial or territorial authority. They look at your years of driving experience, traffic violations, accidents and claims history. Insurance companies then use this information to predict future claims, which directly impacts your auto insurance premium. The good news is that you can use that in your favour: Typically speaking, the better your driving record, the lower your premium could be.
- Your vehicle: What’s your car’s year, make and model? Do you drive a pickup truck, SUV or sedan? All of these details play a major role in determining your car insurance premium, as they impact your vehicle’s value, theft risk and repair and replacement costs. Plus, not every car needs the same coverage: If you drive an older car, you might decide to forego certain coverage options, like collision or comprehensive.
- Where you live and how you use your car: Urban and rural areas face different risk levels, like car accident and theft rates. Do you use your car for work or ridesharing, or just for running errands and getting around in your free time? Each of these has a different risk profile, and the more you drive annually, the higher your risk of something happening.
- What coverage and deductible you choose: In Canada, all drivers have to carry a minimum amount of liability insurance, but after that, you can pick and choose other coverage options to build the right policy for you. More coverage increases your insurance costs, and the details of the coverage matter too. If your car gets totalled, do you want the actual cash value of your car, or the replacement cost when available? Do you want collision coverage? All these decisions will affect your premium. Equally important is the size of your deductible, a.k.a. the amount you pay out of pocket before your insurer steps in. Typically, the higher the deductible, the lower the premium could be, but it’s always important to choose a deductible that fits with your finances.
Curious to learn even more about what goes into pricing a premium? Check out our article on how car insurance premiums are calculated.
How you can potentially save on your premium
Now that you understand what affects your insurance bill, you’re probably curious about what’s in your control when it comes to saving money. Here are some tips that could help you make your premium a little more affordable:
1. Bundle all your insurance policies
If you have tenant, home, condo or auto insurance on another vehicle, bundling everything in one place could make your life easier and your bill a little more manageable. Your online services portal lets you access all your insurance documents in one place, file a claim in the event of a loss and even manage certain transactions yourself. Plus, if you have to file both a home and auto claim following an incident, for example, a fire that damages your home and your car that’s parked in the garage, you only have to pay a single deductible (the higher one), instead of two.
2. Choose the right deductible for you
When you file a claim, you typically pay a certain amount, a.k.a. your deductible, before your insurance provider steps in to cover the rest. Generally, a higher deductible means a lower premium, but not always enough to justify the added out of pocket risk. For example, if your deductible is $1,000, smaller claims will come entirely at your expense.
The key is to balance savings with what you can realistically afford if something does happen. You want to lower your costs today without leaving yourself exposed tomorrow.
3. Maintain a good driving record
Safe driving habits, like driving the speed limit, following the rules of the road and avoiding distracted driving, can not only help prevent accidents, but they can also directly impact your auto insurance premium. The fewer claims filed, the better your driving history is. Plus, violations like speeding tickets can lead to higher premiums.
Do you feel your driving record no longer reflects how you drive? You’ll be happy to learn that every safe driving choice can help improve it over time.
Winter tires for safer driving
Snow, ice and slush are a fact of life for most Canadians each year, so switching to winter tires is a smart habit once temperatures start to drop. Winter tires provide better traction, which can go a long way in keeping accidents to a minimum. And depending on where you live and your auto insurance provider, you may even qualify for a winter tire discount.1
4. Regularly review your auto policy
Each year, in the lead-up to your policy renewal, it’s a good idea to re-assess whether your coverage still fits your needs. Life changes, like moving closer to the office, starting a remote job or retiring, impact how much you drive and, ultimately, your risk profile. Keeping your insurance provider in the loop is key to make sure your coverage stays aligned—and it’s quick and easy with our online services.
Your coverage needs could also change as your car gets older. If you don’t feel it warrants paying for optional coverage, paring down your policy to the mandatory liability insurance could be a good way to save. Keep in mind: Liability insurance only covers damage caused to others, so you’d be responsible for paying the full cost of repairs after an at-fault accident or vandalism. As always, before you make any big changes, it’s smart to speak with your insurance company to understand the impact on your coverage.
5. Take advantage of any available discounts
Discounts vary from insurer to insurer, and across different provinces and territories, so it never hurts to ask about what’s available. Telematics programs like Ajusto® are a common way to save. You can install an app on your phone that uses GPS to monitor and score your driving habits and behaviours, like your speed and braking. Insurers use this information to customize your premium to how you actually drive, giving you more control over your car insurance premium. Plus, just by signing up for Ajusto, you qualify for an automatic 10% discount2 during your first six months!
Save more without sacrificing the coverage you need
Savings are important, but so is having the right coverage. To start, make sure your policy meets the minimum requirements for mandatory auto insurance in your province or territory. However, with just the bare minimum, there’s a real risk you’ll be under-insured and on the hook for repairs, replacements and even legal fees if you cause an accident.
Here’s what it boils down to: What’s your personal threshold for risk? It’s a smart idea to take some time to look into what costs you’d be on the hook for with less coverage, and whether you could afford it. If not, it may not be worth the savings. These decisions can be tough to navigate on your own. That’s why you should take the time to speak with your insurer before removing your collision coverage, comprehensive coverage or other add-ons, willy-nilly. Your insurance provider can help you find ways to save now, without breaking the bank in the future.
Get a personalized auto insurance quote from Desjardins Insurance
Shopping for affordable car insurance? Desjardins Insurance can help you find the coverage that’s right for you. Get a free online quote today and let us put our expertise and experience to work for you!
Key takeaways
Now that you’ve got an idea of the main ways you can save on auto insurance, here are the main takeaways:
- Your car insurance premium is determined by multiple factors: your driving history, vehicle, location, vehicle use, coverage and deductibles.
- Safe driving habits may be your best bet to both avoid accidents and decrease your premium, whether that’s by keeping your driving record clean or through a telematics program like Ajusto®.
- Bundling your policies (multiple vehicles, tenant or home insurance) with one insurance company can simplify management and potentially lead to real savings.
- Take the time to review your coverage and deductible each year and update your insurer on any life changes that could impact your premium.
Affordable car insurance FAQ
Your premium depends on multiple factors, including your driving record, what type of vehicle you drive, where you live and what coverage and deductible you choose. Luckily, some of these are within your control, like improving your driving history through safe driving habits. You can also review your coverage and deductible with your insurer to make sure they align with your needs and budget.
As a general rule, a higher deductible usually does lower your premium—but it also means paying more out of pocket before coverage kicks in. So the key question is: Could you afford your full deductible if anything happened? There’s no one-size-fits-all answer. The right choice depends on your finances and your tolerance for risk. If you’re unsure, it’s worth contacting your insurance company for personalized advice.
Often, yes. Bundling home and auto insurance can lead to savings and make it easier for both you and your insurer to manage your policies. Insurance companies often like to reward customers for their loyalty.
Shopping for car insurance can feel overwhelming, but a few key steps can make the whole process easier:
- Make a list of what’s covered under your current policy
- Figure out what coverage best fits your needs
- Compare the options on the market to your current coverage
Remember, you don’t want to shop based on price point alone! Saving now only to pay more later isn’t the goal. Instead, think about what you can realistically cover yourself and go from there. Your insurer can help you find the right balance for you.
Yes, any major life change could affect your premium. Say you switch jobs and no longer have to drive as much, or you retire and no longer have a commute. In that case, you’re driving less, which changes your risk profile as a driver. The same goes for moving or modifying your vehicle: These changes could also bring your premium down. That’s why it’s always a good idea to review and update your policy each year at renewal.
Learn more
1. Winter Tire Savings not available in QC.
2. The 10% discount is an enrollment discount, and subject to conditions. After 6 months, it will be replaced with a personalized premium, which can go up or down depending on your driving behaviours and habits. The discount and the personalized premium do not apply to certain endorsements or additional coverages.
Certain conditions, exclusions and limitations may apply.
The terms and conditions of the coverages described are set out in the insurance policy, which always prevails.
These tips are provided for information and prevention purposes only. They are general in nature, and Desjardins Insurance cannot be held liable for them. We recommend using caution and consulting a certified insurance agent for comprehensive, tailored advice.
Savings are based on each client’s individual profile. Savings and discounts are subject to eligibility conditions. Rates and discounts are subject to change without notice.
Auto Insurance is not available in MB, SK and BC due to government-run plans.
Ajusto® is a registered trademark of Desjardins General Insurance Inc., used under licence. Ajusto is underwritten by Desjardins Insurance. Ajusto is only available in Alberta, Ontario and Quebec.
Subject to the Terms and Conditions of the Ajusto Program in effect on the date of your enrollment. Visit our website at desjardins.com/ajusto for details.
Desjardins Insurance refers to Desjardins General Insurance Inc. in Quebec and Certas Direct Insurance Company or Certas Home and Auto Insurance Company, underwriters of automobile and property insurance in other provinces and territories.