What are the best ways to save on car insurance?
To understand how to save money on your car insurance, first we need to know something about how your premiums are calculated.
In general, your premium is based on 4 factors:
- Rate Class – This generally refers to the intended use of your vehicle. If your vehicle is for pleasure use only and you don't drive anywhere farther than a certain pre-determined distance (usually 15 km or about 10 miles), your premiums will be cheapest. Conversely, if your vehicle is rated for carrying passengers for compensation (like a bus or a taxi), your premium will be higher because not only will you be driving farther and more often, you will have more people in the vehicle for whom you may be liable in the event of an accident.
- Territory – Often, the territory in which you will be primarily operating the vehicle has a dramatic effect on your premiums. This is because some areas may have higher medical bills or are known to award high damages for bodily injury in liability cases. For example, some jurisdictions have a limit on how much damages someone can claim for pain and suffering, while others do not.
- Claims History – Your driving history will have a large impact on your premiums. Most insurers have a base rate and will then use a "claims rated scale" to determine how much of a premium discount you get based on the number of years you've been driving without an at-fault claim. While this varies from insurer to insurer, discounts can be as high as 43% for the safest and most careful drivers.
- Make/Model/Year of Vehicle – Your insurer will use this information to determine the cost to repair your vehicle and also the type of coverage to give you. A more expensive car will require a higher premium and a large cargo truck will not be able to purchase a "pleasure use" policy.
Now that we've gone over how premiums are calculated by insurers, we can talk about ways to save.
- The first and most important thing is to make sure you're purchasing a policy in the right rate class. The difference in premiums between pleasure use and business-type uses is enormous. Check with your broker to see which rate class you fall into (find out whether your car is still considered a personal passenger car if you sometimes use it for work).
- Another way to reduce your premiums is to simply increase your deductible. Your deductible is the amount you pay on a claim before the insurer pays anything. The higher your deductible, the fewer claims you can make and the cheaper your insurance premiums will be. But it's important to strike a balance here. I do not recommend trying to save money by raising your deductible so high that it is almost never worth collecting on your insurance (consider The Pros and Cons of Increasing Your Auto Deductible).
- There are also many discounts you can get with your insurer. The best one is to increase your discount level by maintaining a safe driving history but many insurers also offer discounts for experienced drivers that have held a drivers license for more than 10 years. With the rise of new technology, insurers are also offering discounts in exchange for installing "black boxes" or other monitoring devices to keep track of your driving habits (see An Intro to Usage-Based Auto Insurance and Telematics to learn more).
There are just a few things you can do to save some money on you car insurance policy. For a more in-depth discussion, I suggest you contact your broker and find out whether they have some other specific options and discounts you can take advantage of.
(For more advice, check out Experts Share Top Tips for Saving on Auto Insurance.)
Written by Jacques Wong
Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.
In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.
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