No matter what anybody says, car insurance is complicated. Adding to consumer’s confusion on this subject is the myriad of myths surrounding it.
It’s important for consumers to have accurate information so they can make educated, informed decisions regarding their car insurance.
So what’s fiction and what’s fact?
- The colour of the car affects the rate of insurance.
Fiction: The truth is car insurance rates are based on the vehicle year, make, model, body type and engine size, plus the individual driving record and geographic location
- Car insurance companies are allowed to charge whatever rates they want.
Fact and Fiction: The truth is that in Ontario the Financial Services Commission regulates the premiums charged by insurance companies as well as their underwriting guidelines. An insurance company in Ontario can’t even reduce their rates or offer a new discount, much less a rate increase, without first getting approval from the Financial Services Commission. Quebec, Manitoba, Saskatchewan and British Columbia all have government run car insurance. It’s my understanding that some of the remaining provinces have regulations on insurance rates and some do not.
- Comprehensive coverage covers you for everything.
Fiction: For car insurance, comprehensive coverage is one type of protection available and it pays for damages caused by an event other than a collision such as: fire, theft, vandalism, broken glass (eg. windshields) and some weather related damage (eg. windstorm knocks a tree onto your car)
- Having my car and house insurance with the same company will give me the lowest rate.
Sometimes, but not always: Buying more than one product from the same insurance company does not always mean you’re getting the best rate available. In many cases, a customized insurance package created for you by an independent broker with policies from competing insurance companies can produce higher savings.
- Car insurance rates reduce dramatically once you turn 25.
Maybe: Age is only one factor insurance companies look at when determining rates. The driver’s experience, length of time licensed, as well as the type of vehicle, location and the use of the vehicle all play a part in the rating. I once had a client who was driving a vehicle that was between 15 and 20 years old. On his 25th birthday he went out and picked up a brand new sports car. His rate really didn’t go down, but that had nothing to do with his age and everything to do with his vehicle. Had he kept the other car, there would have been a rate decrease in his case.
The best advice?
Don’t get insurance advice from unreliable sources. Get a good insurance broker who works with several different insurance companies and ask lots of questions.
How do you find a good insurance broker?
Ask your friends and family for a referral if they’re happy with their broker.
Liane Wood is a chartered insurance professional and registered insurance broker. Visit her website at: www.insurance-rates.ca
