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Unless you want to risk a hefty ticket, car insurance, either one-way or two-way, is a necessity. Given the fact that insurance is mandatory in Canada, it needs to be properly incorporated into your finances. This way you can avoid not being able to make your monthly insurance payments. Although insurance is mandatory, there are still many ways in which you can minimize its cost.

Buying a car? Learn how to budget your car expenses.

Car Insurance 101

For a monthly or annual premium, your car insurance provider will protect you from financial loss if you’re ever involved in a car accident or if your car is stolen. In general, car insurance provides you with coverage for:

  • Property – If your car is damaged in an accident or if you’ve been a victim of theft, your policy will cover you.
  • Liability – Auto insurance also protects you from people suing you for property damage or bodily injury.
  • Medical – If you’re injured during a car accident, your car insurance will also cover the cost of your injuries.

Factors that Affect Car Insurance Rates

Car insurance is determined by many variables. While some may be obvious, others are not. Here are some factors that can affect your car insurance rates:

  • Your Coverage – It’s quite obvious that the amount you pay for insurance has a lot to do with the kind of coverage you have as well as the provider you choose. For example, in some places, you can opt for no-fault car insurance, where the insurer will pay directly for any losses. In different places, you also have tort insurance, which offers different forms of coverage depending on more specific needs, such as comprehensive coverage and collision coverage.
  • Your Car – Insurers will also take into consideration the make, and model of your car, along with yearly mileage.
  • Your Personal Details – When insurers assess your level of risk they will look at factors such as your age, sex, marital status, driving record, previous insurers, and how urban of an area you live in.
  • Your Driving History – Insurers will also evaluate how you’ve driven in the past. The more infractions and claims you have, the riskier you look and thus, the higher your rate will be.
  • Your Credit Score – You may not think of your credit score is a factor, but your credit-based insurance score can affect your insurance rates. This is because it provides insurers with an idea of how you’ve managed your debt and your credit score.

Find out why car insurance rates for women are cheaper.

Cutting Your Car Insurance Costs

Keep in Contact with your Insurance Agent

Whether on the internet, radio, or emails you receive, always keep an eye out for potential deals and promotions. Approach your insurance agent with questions regarding new discounts advertised, you just may be able to find a better deal.

Shop Around Annually

Statistics have shown that twenty-five percent of drivers have not shopped around for new coverage in sixteen years or more. When shopping for insurance rates, you should not just go through your own insurance agent. This is because of your own agent will likely be acting with his (and his company’s) best interests in mind.

Don’t trust your insurance agent? Find out if your insurance agent is misleading you?

As such it is important to obtain quotes from multiple insurance companies to get the best rate. Online comparison platforms like Insurancehotline.com and The Co-operators provide quotes based on your needs from multiple lenders with a single application. Through online tools such as these, you’re sure to find the best rate.

Read this article to learn about what your insurance provider doesn’t want you to know.

Bundle up

A lot of insurance providers provide insurance for more than just cars. They often offer home, travel, and life insurance as well. In an effort to gain more business, these insurance providers offer discounts if your bundle two or more insurance policies with them.

Credit-based Insurance Scores

Check to see if your province allows insurance companies to use credit-based insurance scores. If this is the case, this should be a strong motivator for improving your credit score. With a healthy credit score, your likelihood of having lower premiums will go up. If credit-based insurance scores are an option to you, the best plan of action would be to take six months and commit to improving your credit score; once your credit history is considerably cleaner; it’s time to shop around for better rates.

Be Cautious with your Car

Something you can do to avoid losing money through insurance that has nothing to do with how you manage your finances is driving carefully. The better driving record you, have the less you will end up paying for insurance in the long run. When purchasing a car, try not to get carried away and simply focus on the excitement of a new car and how much the car itself will cost you initially. You also need to factor in increases in insurance coverage.

Types of Cars

When purchasing a car, it is important to keep in mind that safer cars will ensure lower insurance costs. On the other hand, a sports car will have much higher insurance costs. Fortunately, the belief that car insurance varies according to the paint job is a myth.

Looking for a car with good value? Check out these cars with a high trade in value?

Types of Insurance

Make sure your type of coverage is aligned with the type of car you have. Having full comprehensive coverage would not make much sense if you are driving around in a ten-year-old car. A ten-year-old car would usually call for one-way insurance. It is best to speak with your insurance agent to assure that your coverage is aligned with the kind of car you are driving.

Increase Your Deductible

Deductibles are the amount of money you have to pay before your insurance kicks in. For example, if you have a car accident with damages totalling $3,000, and a deductible of $1,000, you’re insurer will only have to cover $2,000 of the damages. However, if you have zero deductibles then your insurer will have to pay for all of the damages. As such when determining how much your deductible should be, you should keep in mind that the lower your deductible is, the higher your premium will be.

Bottom Line

While car insurance is expensive, it does provide a lot of financial protection and peace of mind. Just be sure to compare rates and policies so that you’re not paying more than you should. If you follow these general tips and guidelines, you should be able to successfully maximize your savings by minimizing your insurance rates.

Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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