An introduction to Car Insurance in Canada
In Canada, if you want to drive a car legally, you must have car insurance. Car insurance (also commonly referred to as auto insurance) protects you, the driver, from costs which may arise as a result of accident or theft related to your vehicle. For example, if you were to get into an accident while driving, your car insurance would pay for the repairs to the other person’s car, as well as your own, depending on the type of auto insurance you have.
The reason why car insurance is required by Canadian law is it reduces the financial risk of car ownership; if, as a car owner, you had to pay to repair all damage done to your car in an accident, even if though you did not cause the accident, it would significantly increase the financial risk of driving. By enforcing car insurance by law, this risk is mitigated, as you can be assured that if someone is driving legally, they have insurance, and therefore if they cause damage to your car, their insurance will pay.
Auto insurance comes in different forms; some types of auto insurance offer full coverage, meaning that if your car is damaged in an accident caused by you, your insurance will still cover repairs. Other types of cheaper car insurance only covers repairs to other people’s cars.
Car insurance rates vary by insurance company; rates are determined by the insurance company’s “rating criteria”, a set of rules they use to determine what type of customers they would like to service. By changing their rating criteria, insurance companies are able to better control the amount of risk they take on.
The insurance companies which offer the cheapest car insurance rates tend to have the most stringent rating criteria – in other words, they are the most “risk adverse” auto insurance companies. Because these car insurance companies are risk adverse, they receive less claim requests, meaning they have to pay out less money. This enables them to in return charge less to their clients.
As a driver, the main factor which affects your insurance rates is your driving record. The less accidents and tickets you have on your record, the more likely you will be able to achieve lower rates. Don’t be afraid to shop around when trying to find the best rates – you may save yourself quite a bit of money!