What is a car insurance quote?

A car insurance quote estimates your premium for a car insurance policy. Insurance companies calculate the quote using the information you provide, such as your age, car you drive, driving history, and postal code. Every insurer uses a unique formula to calculate your car insurance quote, so even if you provide the same information to different insurance companies, no two quotes will look the same.

After applying for a policy, an insurance company's next step is to figure out how much risk you pose to them — what is the likelihood of you getting into a car accident, and how expensive will the damage be?

Insurance companies use roughly the same methodology to assess risk. Here are the main things that influence your rate:

• Your age

• Your forward sortation area (the first three letters of your postal code)

• How long you've had your licence

• The type of car you're looking to insure

• Your insurance history

In addition to the criteria above, car insurance companies in Ontario can also use the following factors to calculate your rate:

• Your gender

• Your licence level

Depending on your answers, insurers will place you in a specific rating group (people with similar profiles). Your rating group determines how much you pay for coverage.

Insurance companies have an ideal customer they want to attract. Most insurers reserve their lowest rates for experienced drivers over 50.

On the other hand, some companies are willing to assume more risk, so they offer inexperienced drivers coverage at competitive rates. You can't tell which insurer will provide you with the lowest rate based on their advertisements. It's better to compare rates from multiple insurance companies.

Use our car insurance calculator to calculate and compare your auto insurance quotes from 50+ Canadian car insurance companies all at once to find your best quote.

Factors that affect your car insurance quotes

Insurance companies consider many factors when calculating your insurance rate.

• Vehicle type: The type of vehicle you drive impacts the premiums you pay. Some cars are associated with additional risks, including their likelihood of being stolen, how much they cost to repair, and their safety rating and features. There is also some perceived behavioural risk associated with different vehicles. Insurers are more willing to offer low rates to drivers with "sensible" cars. As a result, when shopping for insurance, you might notice your dad's 10-year-old minivan suddenly seems more appealing.

• Commute distance: How much you drive will also affect your premiums, which is why insurers always ask for your anticipated vehicle usage. The less you drive, the cheaper your car insurance premium is. The more you drive, the higher your chance of being involved in a car accident, and the more you will have to pay for insurance.

• Driving history: Individuals with clean driving histories can expect to pay lower premiums than those with tickets and accidents on their record. The number of years you have had a licence also matters.

• Demographics: Where you live makes a difference. Areas with higher occurrences of theft and collisions result in higher premiums. Your age can also come into play. Drivers aged 25 or older will generally pay less to insure a vehicle. Statistics show that younger, less experienced drivers are more likely to be involved in traffic collisions.

• Coverage type: The larger the scope of the coverage and the higher the coverage limits you choose, the more you will pay for insurance. The deductible, which is the amount you must pay out of pocket following a claim, also influences your insurance premium. The insurer will offer a cheaper rate if you are willing to take on more risk with a higher deductible.

• Discounts: Most insurance companies will provide discounts if you meet specific criteria. For example, if you have winter tires or more than one vehicle, you may be eligible for discounts. When you get quotes with RATESDOTCA, we ask the same questions as the insurers to ensure you are getting the lowest possible price.

• Age and gender: Teens and twenty-somethings pay the most for car insurance. Within that demographic, males can expect to pay significantly more than females. By age 35 and beyond, the differences between men and women mostly even out. That said, men should expect to pay a little more for their coverage. Insurance companies are allowed to set their own rates for non-binary drivers but only if it's in line with what has been approved by provincial regulators. Insurance providers often charge the low end of the average male or female rate.

• Marital status: In most of Canada, insurance companies are allowed to ask about your marital status to set your auto insurance premium. The exceptions are Manitoba, Nova Scotia, and B.C. One explanation why insurance companies care about your relationship status is that spouses will likely take turns driving the vehicle, which changes the risk profile of insuring that vehicle. Luckily for single drivers, just because a company can ask about marital status doesn't mean they will. Insurance providers all have slightly different formulas for evaluating risk and setting premiums. That's why it's crucial to compare rates from multiple companies to find the lowest price.

• FSA: This stands for Forward Sortation Area, which is represented by the first three characters of your postal code. Insurance providers look at these geographic markers to help set your rate since location affects the probability of future claims. Insurers look at the following characteristics in an FSA to calculate risk: the number of vehicle thefts in the area, the amount the insurer has paid out to policyholders, and incidences of insurance fraud. Generally, drivers in commuter cities pay higher insurance rates than drivers in rural areas.

• Driving experience: The longer you've held a licence and car insurance, the cheaper your insurance will be. The inverse is also true: If you don't have a lot of experience driving, insurance companies view you as riskier to insure. For example, if you get your driver's licence in your thirties, your rates may be comparable to drivers in their twenties.

• Claims history: An insurance claim is a request by a policyholder to the insurance provider for compensation for a covered loss. Insurers look at your history of claims and use it as an indicator of what to expect from you in the future. Suppose you have a history of making at-fault claims. In that case, your insurance company will view you as someone who is high-risk to insure. It will charge you non-standard (i.e., above average) rates for coverage. It's important to note that this holds even if your insurer validates a claim and provides compensation. If you are at fault for the incident, your insurance rate will go up at renewal. (You can protect your record by purchasing an accident forgiveness endorsement.)

Types of car insurance coverage in Canada

Mandatory coverages

Every Canadian province and territory requires drivers to have car insurance. The types and amounts of coverage needed vary by location.

Mandatory car insurance requirements typically include the following coverages:

Third-party liability: This coverage protects against losses incurred from third-party claims when you're at fault for causing an accident. This includes damage to someone else's property, bodily injury or death. Your auto insurance quote will always include third-party auto insurance coverage since it's mandatory across all provinces and territories in Canada.

Direct compensation-property damage (DCPD): This coverage means the insurer compensates you directly when your vehicle is damaged in an accident for which you are not at fault. It covers the damage to your car, its contents and the loss of use of your vehicle. Property damage coverage is mandatory in most provinces.

Uninsured automobile protection: This coverage protects you if you get in an accident with someone who does not have valid insurance coverage. It can also protect you if you're the victim of a hit-and-run.

Accident benefits: This coverage protects you from injury in a collision, whether you are the driver, a passenger, pedestrian or cyclist. There are four primary accident benefits: income replacement, medical, death/funeral, and miscellaneous.

Optional car insurance coverages

These types of coverage are usually optional and can be added to a car insurance policy if you want extra protection. Note that in some provinces or territories, these coverages may be mandatory.

Collision coverage: This coverage protects your vehicle against damage from a collision with an object (like another car). With this coverage, your provider will pay to repair or replace your vehicle, up to its actual cash value, regardless of who is at fault. Collision insurance is not mandatory, except in Manitoba.

Comprehensive coverage: Comprehensive insurance covers non-collision damage to your vehicle, such as theft, hail, vandalism, etc. Comprehensive insurance is only mandatory in Manitoba.

Specified perils coverage: This coverage protects against damages caused by named perils, such as theft, attempted theft, explosions and natural disasters like fire or lightning. Only perils specified by the policy are covered.

All-perils coverage: This coverage is a combination of both collision and comprehensive insurance. All-perils coverage protects your vehicle from all causes of loss except those directly mentioned as exclusions in your policy. It also provides additional protection if your car is stolen or damaged by another driver.

Endorsements

Insurance endorsements are another optional coverage type, often referred to as "riders."

These coverages are purchased in addition to your base policy and change the terms of the contract. Endorsements can be used to add, delete, alter, or exclude coverage and adding them will increase the cost of your insurance.

Endorsements can be added at any point, meaning you don't have to wait for your policy's renewal period to adjust your coverage.

Here are the most common endorsements available to drivers in Ontario and Alberta.

Ontario endorsements

• OPCF 20: Coverage for Transportation Replacement: Provides replacement transportation and rental car insurance if you get into a car accident or if your car is stolen.

• OPCF 27: Liability for Damage to Non-Owned Automobile(s): Provides comprehensive collision coverage for vehicles you rent or borrow. Your third-party liability and accident benefits will also be extended to your temporary vehicle. Coverage is active while driving in Canada and the U.S. If you have this endorsement, you don't need to purchase insurance from a car rental service.

• OPCF 39: Accident Waiver/Forgiveness: Your claims and driving histories greatly impact how much you pay on car insurance. If you get into an accident, your premium will likely rise upon renewal. Adding this endorsement will ensure that your premiums will not increase in the event of your first at-fault accident and your first claim.

• OPCF 43: Waiver of Depreciation: This endorsement prevents your insurance company from factoring in depreciation from the value of your car when settling for damage or loss. You'll be able to replace your car with one of the same make and value.

• OPCF 44R: Family Protection Coverage: This endorsement provides extra compensation if you are involved in an accident with a driver who doesn't have adequate insurance coverage to cover the full cost of your medical expenses. This endorsement will bridge the gap so that you receive the outstanding funds.