Car insurance: Driving for discounts

You can save thousands of dollars on your car insurance—while making sure you still have the coverage you need.



From the December/January 2012 issue of the magazine.


When was the last time you heard someone at a cocktail party state that auto insurance companies charge fair and reasonable fees? Thought so. If there’s one thing consumers agree on, it’s the exorbitant cost—and seeming randomness—of auto insurance premiums. Rates vary not only by vehicle type, driving record and region, but also from company to company. If you do your homework, however, you can save big on both cost and aggravation.

Building your policy

Think of your auto insurance policy as a mix-and-match wardrobe. Aside from a few de rigueur colours like basic black, the build is up to you. Below are the main components you have to choose from:

Third-party liability insurance. This insurance is mandatory, and is considered “your first line of defence if anyone decides to sue you,” says Fairview Insurance Brokers principal Fred de Francesco. You have some say over the amount of coverage you get, but he cautions against skimping in this area. “What happens if you run into a streetcar or bus? Bumping up your coverage from $200,000 to $1 million only hikes up your premiums by about $100, so it’s well worth the cost,” he says.

Accident benefits: Also mandatory, this component covers your medical expenses—everything from ambulance services to chiropractic treatment—if you’re involved in an accident, whether you’re at fault or not. A tip from Allstate Canada’s Saskia Matheson: “Your employee benefits may overlap with this coverage, so find out about your medical and disability coverage. If you have enough, you don’t need to buy extra coverage on your car insurance.”

Collision and Comprehensive: Collision insurance covers damage to your vehicle resulting from an impact with another vehicle or object—including the classic hit-and-run in the grocery-store parking lot. Comprehensive coverage takes care of such nasties as theft and vandalism.

While both collision and comprehensive insurance are optional, Margot Bai, a former insurance agent and author of the book Spend Smarter, Save Bigger, advises against waiving collision and comprehensive coverage, “unless your car is so old that the increase in premiums you’d face when making a claim exceeds the value of the vehicle.” Think $5,000 or less.

In combination, collision and comprehensive will set you back by a few hundred dollars. You would think that the premiums would go down as your car ages, but Toronto consumer advocate and auto insurance expert Lee Romanov says it doesn’t always work out that way. “If your insurer has had problems with your type of vehicle, the rates could go in any direction,” she says.

Waiver of depreciation: This option entitles you to receive the list-price value of your car if it gets totalled or stolen within the first 24 months. Otherwise, “you would have to pay back the difference between the list price and the depreciated cost,” says Nancy Hamilton, a manager at Hugh Wood Canada.

Rental car coverage: If you frequently rent cars, consider this extra coverage, “which only costs $25 to $50 per year and may be more affordable than paying for insurance every time you rent a car,” says Matheson.

If you want to lower your premiums, consider raising the “deductible” on your collision and comprehensive insurance. This is the amount that you have to pay if you make a claim. Personal finance guru and media personality Gail Vaz-Oxlade recommends “raising your deductible from the standard $250 to $500, which could save up to 20% on your premium. Go for a $1,000 deductible and you could save 30% or more.”

Shop ’til you drop

Every insurance company has a different way of assessing risk, says Marlene Landry, manager of consumer and industry relations for the Atlantic region of the Insurance Bureau of Canada. “Some companies will hike up your rate after one accident, others won’t change your rate until you’ve had two.”

That’s why you should consider enlisting an independent insurance broker to shop for you, rather than going directly to one provider. “A single broker may have contracts with five or six insurance companies, and you need to talk to several,” Landry notes.

A further stone to turn: the group insurance packages offered by many professional associations and university alumni societies. “If your association consists of accountants who drive Volvos to work, they might be able to offer you a lower rate than you’d get from an individual policy,” says Automobile Protection Association president George Iny.

The claim game

Say you run into the car ahead of you at an intersection, crunching its rear bumper. Should you involve your insurance company? In fact, “the law requires you to do so,” says Michael Turk, legal counsel for the APA. Otherwise, “you run the risk of voiding your policy.” Turk acknowledges that many people skirt around this bit of law and pay for minor collision damage out-of-pocket (assuming the other party agrees). After all, why make an $800 claim if your premiums will go up by $500 a year for the next six years?

Here’s one reason: “The person you rear-ended could make a personal injury claim against you down the road—perhaps because of chronic back pain they incurred after the collision,” says Turk. If you didn’t go through the insurance company at the time of the accident, “you now have a huge problem. The company could decline to cover you.” You’re on safer ground if you write your neighbour a cheque after rear-ending her parked car, “though it’s still a breach of policy,” says Turk. “Consider yourself warned.”

10 comments on “Car insurance: Driving for discounts

  1. i find car insurance one of the most confusing industries ever!! There are so many rules and regulations, coverages, situations etc to drive one crazy. Not sure if this is a good method but i just try and avoid talking to my brokers and renewing each year without even looking at my papers. One thing that does help though is running my <ahref="">insurance quotes through to make sure i'm not getting jipped off!


  2. Every car owner needs a better insurance for their car that delivers a better compensation in case of any damage. Car insurance is quite helpful for every car owner but we are just wondering that does insurance company charge fair and reasonable price for their customer but a fair discount might be delivers a lot to the customer's interest.


  3. Car insurance or guarantee is very much needed for a person. But it depends upon the consumer and the seller if they agree to provide the insurance or not. Insurance sector stability depends on the consumer and the customer of it. There is a particular age to do insurance in your name and also which type of insurance you should do these all are important. Also insurance are of two type short term and long term. So before doing any insurance you should be confirmed first about that. From my own experience insurance should be very particular and should be a profitable one.


  4. Car insurance is needed in case of car accidents or any damage to the car. This is the first line of defense if somebody tries to sue you. So in case of accidents if your car or vehicle is involved the insurance will help you greatly. If some body claims for personal injury or damage to vehicle then car insurance is very beneficial.


  5. Thanks for this help. Actually one of my cars was stolen before two years ago. After claim I don't have any compensation by insurance sector. I want your suggestion for this and also want to do insurance of my car in a rental basis.

    All we know about car insurance, it secures our future. But we do car insurance because of car stolen and damage. Child car insurance is new for us. The details above this article is insufficient for know about a child car insurance. I can't imagine how much it will be affective?


  6. Car insurance is an important concept for the car user. People always want to pay less as insurance of car. So people can save their money in the sense of that. I think by buying a car in less price will save money in the sense of insurance. Also if your car damages due to any type of incident or accident, then you can get the full worth of it.


  7. Car insurance is quite necessary for the car operators. It is for the using of car and using the road for the transportation. But you can minimize the car insurance by following certain steps.
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  9. I have gone through this article. This is really good. Now-a-days it is really a pain to give the premiums of car insurance. So, we have to be smart to do something to save the money of our own rather wasting it unknowingly. So, from this point of view this article is really helpful and we can prefer this one. Actually,we have to maintain our car to avoid our breakdown and also to get better performance from our car. So we have to repair our car whenever required from good repair centers for its smoother running. .


  10. There are many cheater insurance sectors are there, in such case it is our duty to do inquiry about that sector for our safety. I think this article gives brief ideas about insurance sector and car insurance. I got a clear vision towards car insurance and I have to follow it.

    Any way my opinion on this blog is I prefer the new one because all machinery and durable products comes under depreciation. The value of old car is much less than the rate of its original purchase rate. Maintenance charges separate. Insurance, Installment are additional. Over all calculate it is good to purchase a new one.


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