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What affects your premium

Key factors affecting the cost of your insurance

In Ontario, insurers must submit their rates and rules to the Financial Services Commission of Ontario for review and approval. Once approved, those rules must be followed in all cases.

The rates and rules are developed according to what an insurer thinks are the best combination of factors to produce a profit. Each insurer has its own set of rates and rules which explains why prices vary between insurers. The factors they use are typically:

Type of car. You can find out more about how the type of car you drive can affect the premium in the section explaining the "Clear" system rating cars.

How the car is used: Pleasure use is considered the usage least likely to lead to an accident and therefore it is lower priced. Commuting to and from work is slightly more expensive. (Some insurers allow very short commutes to be rated as pleasure only). Business use is the most expensive of the three.

Location: The province is divided into rating territories. Your rate is usually determined by where you live and because of this, your insurance premium may change if you move.

Tickets: Most insurers define three types of tickets or convictions - minor, major and serious. Most insurers will allow you to accumulate 2 minor tickets in three years before they consider you a higher risk driver and charge you a higher premium. Some insurers allow three tickets before this happens. Any major or serious ticket will result in an increase your insurance premium.

Accidents: Only at fault accidents can increase your premium. See "No-fault" for an explanation of fault allocation. Accidents stay on your insurance record for 6 years although there is a trend to grant better prices to those drivers who have gone an even longer period of time without an accident. If you have been licensed to drive for 6 years and you have not had an accident during that time you would normally qualify for "6 star" rating. If you had an accident 5 years ago you would be a 5 star driver. An accident 4 years ago would mean a 4 star rating, and so on down to a zero rating because of a recent at fault accident. The longer you go without an accident, the lower your premium.

If you are already a 6 star driver with an insurer and then you have an accident, some insurers will change your rating to a 3 star rating when your policy renews, some insurers may change it to a 5 star to recognize your good driving experience before the accident and some may ignore the accident altogether if you had purchased a special accident forgiveness endorsement (not all insurers offer this endorsement).

If you are a 5 star or 3 star driver because of an accident and you try to go to a different insurer, some insurers will grant you the same rating as long as you can prove your old insurer will renew at that rating. Other insurers will rate you according to how long it has been since the accident which could mean a "zero" rating. A "zero" rating is almost always more expensive than a 3 or 5 star rating and therefore you become locked into an insurer unless you are prepared to have your premium rise even higher.

Demerit point system: Demerit points are given for various convictions under the Highway Traffic Act. The number of points you have does not affect your insurance premium. The number and type of tickets will affect your premium. For example: if you have four minor tickets with no points, your premium will be higher than if you have only one minor ticket with 3 points. One major ticket will almost always result in higher premium.

Being "at-fault" for an accident for an accident is normally a reason to increase premium, getting a ticket is not. Although, several tickets will often lead to a higher premium.

You get a ticket under the Highway Traffic Act whereas fault for an accident for insurance purposes is allocated according to the rules in the Insurance Act. See "No-Fault" and "If I have an accident, how is fault determined" for more details.

Driving experience: The longer you have been driving with insurance, the lower your insurance premium assuming no other factor (such as accidents or tickets) works against you. For most insurers 6 years or more is the best rating they offer.

Age: Age is a factor until you reach 25. It does not matter what the usage of your car is if you are under 25 because the age factor replaces the usage factor. For example: a 23 year old driver who drives only for pleasure purposes pays the same premium as a 23 year old sales representative on the road all day calling on clients (after age 25 this would be considered business use)

Gender: A male will pay a higher insurance premium than a female until age 25 if all other rating factors are the same. After age 25 gender is no longer a factor.

Marital status: A married male pays less premium than a single male until age 25, after which marital status is no longer a factor. Marital status does not usually affect the premium charged a female.

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