Have you ever wondered just what exactly goes into calculating your auto insurance premium? Why does your brother-in-law get a better rate than you when you both live in the same neighborhood? Insurers in Ontario look at different factors to decide the level of risk you pose and your likelihood of putting in a claim. In a nutshell, it’s about who you are, what you’re driving and where you live.

Don’t be confused…we’re here to walk you through it.


The premise of insurance is that each individual contributes a relatively small amount into a larger pool. This money is used to cover costs (claims) when there is a car accident. As an Ontario-licensed driver, you have seen or have heard about many types of accidents. The idea behind auto insurance is that only a small percentage of contributors will have losses that will need to be covered. The small amount paid to the insurance pool per month (or per year) leads to a much larger amount of coverage in the event that damage occurs. Therefore, the entire group paying has protection, or “insurance”, for adverse events.


A report from the Insurance Bureau of Canada (IBC) shows that two provinces – BC and Ontario – pay far more on average than elsewhere in the country. 

Part of the reason Ontario ranks so high in auto insurance premiums is it has high incidents of claim fraud. Insurers also handle a large number of lawsuits. Together, both of these realities contribute to the hefty overall costs that are passed on to the Ontario driver. On average, expect to pay between $100 – $200 per month.


Insurers assess many factors – including your driving record – when calculating your auto insurance premium. Your insurance rates are also determined using a combination of factors or risk characteristics. They can be divided in to four categories:

1. Your driving profile 

Your personal insurance profile is created by your insurance company based on:

  • The type of vehicle you drive: Insurance companies use internal data to calculate which vehicles are riskier to insure. They’ll use historical statistics from every claim that’s been reported to them in the past. So, companies know which cars get into more accidents, which ones cost more to repair, and even which ones are vandalized/stolen most often. It will all be entered into your car insurance calculations. Learn how your car measures up by reading “How Cars Measure Up”, published by the Insurance Bureau of Canada (IBC).

  • Your driving record: Your driving record includes previous accidents, the length of time you’ve been licensed, whether or not you’ve taken driver training, speeding tickets, impaired driving convictions, etc. The better your record, the lower your auto insurance premium. If your insurance company assessment determines that you are a high-risk driver, you may have difficulty getting car insurance at all.

  • Where you live: With more drivers and cars, its not surprising that if you live in an urban area you will most likely pay higher premiums. There is a greater chance you’ll be involved in a collision or have your vehicle vandalized/stolen, which contributes to the steeper fees.

  • Your age, gender and marital status: Although there are exceptions to every rule, many preconceived notions about age, gender and status still influence insurance rates. In general, mature drivers have been shown to have fewer accidents than younger drivers. Inexperienced teenagers are still more likely to cause an accident. At 25 years of age, you are likely to see auto insurance premiums drop considerably. At age 40, you start to see even more because demographics indicate you may have kids and, therefore, may be a safer driver. Gender and marital status also affect your risk profile, and may make your rates vary. It is important to note that this is also changing. Historically, men have been shown to drive more recklessly and get into more accidents than women.  

Note: Adding additional drivers to your car insurance policy, such as your children or spouse, can increase your premium. Only add drivers to your policy when necessary. 

  • The amount you drive: It should be no surprise that the amount of time spent behind the wheel will influence your premiums. Whether or not you commute to work or school exposes you to more risk of being in an accident. It’s why car insurance companies ask how you’ll be using your car: pleasure, commuting, or business? They want to know the distance of your commute to work because greater distances can also result in higher premiums. As a rule of thumb, the more you drive, the higher your premiums.

2. The amount of coverage you purchase

The amount of coverage you decide to purchase is the next thing used to calculate your car insurance rate. In Ontario, as per FSCO, it is mandatory to have active car insurance if you own a vehicle to drive on the roads. You must carry third-party liability up to a minimum of $2,000,00, and this covers property damage, as well as bodily injury. Other mandatory coverage includes Direct Compensation Property Damage, Statutory Accident Benefits coverage, and Uninsured Automobile Coverage.

If you buy additional protection, over and above the mandatory coverage, your rates will increase. Additional coverage that may increase your rates include:

  • Comprehensive coverage to protect against theft, vandalism, hail or explosion
  • Increasing your third-party liability protection
  • Increasing your standard accident benefits coverage

Always discuss your options with your isure representative.

3. Choice of deductible

Your deductible is the portion you will be required to pay in the event that you make an auto insurance claim. Your insurance company may offer separate deductibles for each of the different types of auto coverage: 

  • Collision or upset
  • Comprehensive
  • All Perils
  • Specified Perils 
  • Direct Compensation-Property Damage (DC-PD) coverages

As a general rule of thumb, the lower your deductible, the higher your premiums. The higher your deductible, the lower your premiums.

4. The insurance company you choose

Auto insurance premiums can vary greatly from one insurance company to another. In general, insurance works according to the “pooling” concept, in which insurers group similar risk characteristics with similar risk groups. For example, some members of a risk group may have never made a claim, while others may make frequent or substantial claims.

Actuaries are math whizzes who analyze the overall risks and likelihood of claims. They determine what will make a policyholder more or less likely to have an accident that leads to a claim, and determine how to fairly distribute the premiums among policyholders. They also analyze general industry trends and try to predict future claims needs.

In contrast, when you apply for an insurance policy, an underwriter will sell you the policy (or through your insurance broker). The underwriter reviews and evaluates your insurance risk, and the extent of your coverage based on pre-determined factors.

How CLEAR and Telematics can save you money

Insurers use the Canadian Loss Experience Automobile Rating system (CLEAR) to assess the likeliness of your car being involved in a claim and what it will cost. Current data for each make, model and model-year of car is used to calculate expected and actual claims loss experiences. Choose a car with a lower claims risk and CLEAR number and you can expect a lower auto insurance premium.

You can also learn about new cost-savings offered by telematics insurance. By installing a technology device in your car that records your driving activities, insurers can use this information to personalize your auto insurance premium.

Common causes of rising auto insurance premiums

Aside from the expected regulatory regulations on annual auto insurance premiums, there are some additional factors that can cause your car insurance to escalate. These factors can include:

  • Non-payment of premiums
  • Too many at-fault insurance claims
  • Moving to a high-risk area (i.e. urban centres)
  • Purchasing a brand-new vehicle
  • Adding additional drivers to your car insurance policy
  • Neglecting to advise your insurance provider about personal changes
  • Change in occupation
  • Insurance fraud in your location 
  • A lapse in your car insurance coverage

On average, most drivers in Ontario pay auto insurance premiums in the range of $1,300 to $1,800 annually. Rates are higher or lower depending on where you live, the type of vehicle you drive, your driving history and many other factors. Speak with one of our isure representatives today to take a closer look at what you’re paying and to help you find some savings.

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