how car insurance rates are calculated

Whether you're buying car insurance for the first time or you have premium cheques dated older than a Model T, you might be curious why you pay what you pay.

how esurance helps you lower auto insurance rates (and stress)

As a direct insurance company, we allow you total online access to your policy. This approach (on top of being ridiculously convenient for you) allows us to simplify our day-to-day operations and put all our energy into making insurance more convenient for our customers. We're built for a modern and easy approach to coverage, and we bring affordable auto insurance rates, helpful tools, and discount opportunities you can enjoy from day one.

top factors in calculating car insurance rates

Obviously, the specific coverage options, limits, and deductibles you choose matter when it's time to calculate car insurance rates. Beyond that, the following categories generally sway your premium the most:

Your driving record

Because your insurance offers protection in case of an accident, your insurance company does its best to analyze the odds that you'll have one. If you've been in 3 accidents in the past year, for example, there's a high chance of another one in the near future.

Besides accidents, your driving record also details past moving violations and driving convictions (such as impaired driving). In most cases, the cleaner your driving record, the lower your auto insurance rates.

Your demographic (age, gender, and marital status)

To your insurer, age equals experience. And the more years you've been licensed, the more accident-avoidance tricks you have up your sleeve — "tricks" meaning things like patience, skill, and a not-so-leaden foot.

Other important factors could include marital status and gender (statistics say male drivers are more likely to be involved in accidents than females).

If you're worried these factors are unfairly out of your control, take heart: you can always take control of your own driving. And staying safe, avoiding at-fault accidents, and maintaining a sparkling-clean driving record can help keep your rates lower.

Where you live

If you live in an urban area, such as Edmonton, Calgary, or Toronto, or an area with an unusually high theft rate, your premium could be higher than what your friend or family member pays, even if they live in the same province.

less important (but still pretty important) factors

The following pricing elements can also be used to calculate car insurance rates, but typically affect your premium less than your driving record, age, or postal code:

The make and model of your car

Different vehicles have different risk factors. Your insurer may use the CLEAR (Canadian Loss Experience Automobile Rating) system to help determine how safe your vehicle is. CLEAR uses actual claims information to annually rank all cars by their likelihood of being involved in an incident in the future.

Cost to repair/replace your car

Generally speaking, the less valuable your vehicle, the less it costs to repair or replace and the lower your auto insurance rates. However, in rare cases, a relatively inexpensive car may be more costly to insure if, for example, it's prone to accidents or theft.

How the car is used

Do you commute through heavy traffic twice a day, or do you mostly take the light rail and only use the car for pleasure? Simply put, the more time spent behind the wheel, the more opportunities for accidents. So how you (or others in your household) intend to use the car matters to your insurer when calculating car insurance rates.

Prior insurance history

Drivers who've maintained consistent car insurance without any coverage gaps are statistically less likely to get into an accident.

how provinces and territories calculate car insurance rates differently

Provinces and territories can vary when calculating car insurance rates. Specific rating factors might be used in one place but left out in another. In Alberta and Ontario, for instance, age can be a factor in your premium, while in New Brunswick and Nova Scotia, age is not a consideration for insurers.

how pricing varies by insurer

All insurers work under a strict framework of laws and regulations. Yet their exact formulas to calculate car insurance rates can differ based on factors like their unique claims data and history.

Rest assured, however, that accurate and fair pricing is vital to an insurer's longevity. If a policy is priced too high, a shopper isn't likely to become a customer. If too low, the insurer risks financial stability in the event of a claim. Capturing the best of both worlds — affordability and reliability — is as important to us as it is to you.

Start your free online quote

If you're ready to shop, you can get a free quote anytime. You can also reach our friendly Esurance experts by calling 1-888-ESURANCE (1-888-378-7262) and learn more about the risk factors of your area from the people who know them best. No matter your circumstances, we'll walk you through your options and help you find a policy that fits.