How to Estimate Car Insurance Before Buying a Car

How to Estimate Car Insurance Before Buying a Car

November 2, 2018    Budgeting Advice

Even though car insurance is mandatory in Canada, many people forget to include it in their overall vehicle budget. Just like gas and maintenance costs, insurance is something you’ll be paying for as long as you own your vehicle. You’ll need coverage before you drive your new car home, so it’s a good idea to figure out how much you can expect to spend on insurance before you make the purchase.

Why car insurance is important

There’s a good reason car insurance is mandatory for everyone: road accidents happen all the time. It’s an unfortunate truth that every driver needs to protect themselves against. Insurance helps shield everyone involved in an accident from liability and the full costs of a fender bender. Most auto insurance policies have three main coverage areas:

  • Personal injury coverage: Protects against bodily injury, loss of life or loss of income resulting from an accident.
  • All perils collision coverage: Helps cover the cost of repairs for damage to your own vehicle.
  • Third party liability coverage: Helps cover the cost of damage to someone’s vehicle or property, or injury to another person if you’re found at fault for an accident.

If you get into an accident without insurance in Canada not only will you be fined for lack of coverage, but you’ll also have to pay for any damages out of pocket.

How car insurance works

Auto insurance comes into play if you get into a car accident or if your vehicle is damaged in a hit and run, by vandals or during a hail storm. In all these cases you can make a claim with your insurance company and they’ll assess the situation and damage and let you know if your policy will cover the necessary repairs.
When you make a claim you will have to pay your deductible before your insurance policy kicks in — the deductible is the portion of the policy that you’re responsible for. If your claim is valued at $3,000, for example, and your deductible is $500, you’ll be expected to pay $500 and the insurance company pays the remaining $2,5000. Most deductibles start at $500, but you can usually negotiate this with your broker.

Differences between public and private insurance

Each province has its own rules and regulations when it comes to auto insurance. In British Columbia, Saskatchewan and Manitoba drivers can only buy insurance from government-run public insurance companies. In Quebec, only bodily injuries are covered by public insurance, while other coverage must be purchased through a private company. Elsewhere, private insurance companies compete for driver’s business.
While public insurers offer an easy to understand one-size-fits-all model, drivers may be able to get a more competitive deal on insurance through a private company.

What are the factors that affect your insurance rate?

Your insurance rate is based on a bunch of different categories that determine how risky you are as a driver. One way you can save money on your rate is by driving safely, since most insurance providers reward good driving with rate discounts. Here is a list of some of the factors that go into determining your insurance premium:

1. Vehicle type: The kind of car, SUV, truck or minivan you drive can affect how much you pay for insurance. This is because some models are more prone to crashes or theft than others. Vehicles with lower safety ratings will be more expensive to insure as will high-end, luxury vehicles because they are generally more expensive to repair or replace. If you’re looking for a lower insurance rate, you should be shopping for a reliable car with a moderate price-point.

2. Where you drive: Certain areas pose more of a risk for collisions or vehicle theft than others. Generally speaking, city drivers are more likely to get in a crash with another car that rural drivers because of the sheer number of vehicles sharing the road. Most insurers also look at where your car will be parked because some neighbourhoods experience more property crime than others.

3. How you use your vehicle: Do you drive to work everyday or are you only using your vehicle for weekend trips out of town or to the grocery store. Whether you use your car is a work, all-purpose or pleasure vehicle will affect your premium.

4. Driving record: As we mentioned above, safer drivers will pay less for insurance. If you have a lot of accidents, speeding tickets or insurance claims on your record your rate will be significantly higher. Major driving offences can stay on your record for years.

5. Coverage amount: Plain and simple, the more coverage you get the higher your premium will be. Choosing more liability coverage is usually a good idea because you’ll be better protected in a serious claim, but that extra coverage will mean a higher monthly payment.

6. Driver’s personal information: Believe it or not, but some insurers also look at age, sex, driving experience and employment status when determining a driver’s rate.

7. Car insurance calculator: Insurers often plug the details into an online auto insurance calculator to see how much you can expect to spend on insurance. You can try this for yourself before going to get insurance. You might be surprised by the results and it’s possible a high insurance estimate could have you re-thinking the purchase.
Manitoba Public Insurance has an insurance rate calculator that is based on the metrics they used for determining a driver’s Autopac rate. You’ll be make, model and year of the vehicle you’re looking to insure; as well as your postal code, vehicle purpose, driving history and coverage amount. The program takes all of those factors into account and spits out an estimate for you.
Keep in mind that online estimates aren’t usually as accurate as a direct quote from an insurance provider.So shop around for quotes! It doesn’t hurt to shop around for insurance quotes — especially if you live in a province with private insurance companies. Different companies have different rates and you want to make sure you’re getting the best deal on the best coverage.

At Birchwood Credit Solutions, we ensure our customers are secure every step of the process. From application to driving away with a vehicle, we’ve developed a hassle-free process that is easy and quick. Fill out our online form to see for yourself. It only takes two minutes.

Rebecca Lake
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