Why Canadian insurance is so expensive?

When buying a car, insurance is likely the last thing on your mind. But it’s one of the most significant expenses you’ll incur as a car owner in Canada. In most provinces, premiums are over a thousand per month. So why is Canadian car insurance so expensive?

Car insurance in Canada is expensive due to factors such as distracted driving, weather, cost of the vehicle, inflation, and insurance fraud. All of these means higher cost for the insurer. But you can still get cheaper insurance by combining insurance, getting a reliable car, and comparing deals.

However, it’s noteworthy that several factors will also determine the cost of your insurance. Your driving record, type of car, etc., are crucial. Here, we discuss why car insurance in Canada is expensive.

Factors Contributing to Canada Auto Insurance costs

The high cost of auto insurance in Canada is due to several reasons. These include:

1.   Weather conditions

Canada’s weather has always been harsh, but it’s getting worse in recent years, with more significant cars damage. In 2018 alone, severe weather caused $1.9 billion worth of damage. Whether it’s the hail storms, wildfires, floods, or tornados, several of these events affect cars which means insurance companies have to pay more in claims. Hence, the need to also hike insurance costs to meet these claims. The high cost of auto insurance in Canada only mirrors the general cost of all types of insurance. Whether it’s Ontario or Alberta, these natural disasters due to worsening weather conditions are more common than you can imagine. For insurance companies, it becomes necessary to charge high premiums to meet the obligations.

2.   Distracted Driving

In recent times, accidents and collisions due to distracted driving have increased. In Ontario, death due to crashes caused by distracted driving has doubled since 2000. With people becoming more unfocused, the risks of driving have also increased, leaving insurers with only one option, to increase premiums to cover the risk they bear. Several factors are responsible for distracted driving these days. The shorter attention span and smartphone use are the primary culprits.

3.   Cost of vehicles

The cost of insurance also depends on the price of the property to be insured. New vehicles are now more expensive than their old counterparts, which means insurance companies have to charge more for them. The cost of replacing or repairing cars nowadays is much higher than what they were a decade or two ago. This isn’t surprising given that modern vehicles come with several gadgets that make any damage too costly. Cars now have smart displays, rearview cameras, GPS, smartphone integration, data processing software, driver assistance features, and more. All of this costs more money to fix or replace. Hence, higher monthly premiums.

4.   Inflation

Another factor responsible for the expensive cost of insurance in Canada is inflation. Inflation means more money is required to pay for a thing compared to what it was before. It’s a global problem with no clear solution in sight yet. But it has significantly affected the cost of insurance rates in Canada.

5.   Higher Costs for Insurer

In some provinces such as Ontario, where the accidents benefits law is quite generous, insurance is high. This allows the insurance providers to pay the benefits when they arise. For British Columbia, the costs of lawsuits and injury claims mean that the insurer has to pay more, and they factor these costs into the premiums. In New Foundland & Labrador, the Tort system makes it possible for accident victims to sue at-fault drivers and get big awards for a small injury. This has increased the liability on insurers, forcing them to hike their costs too.

6.   Insurance Fraud

Insurance providers in Canada have to deal with insurance fraud annually. This eats deeper into their profits margin than we can imagine. While car insurance might seem expensive, insurers don’t make much in return. The annual cost of insurance fraud in Canada is $1.6 billion.

Cost of Insurance in Canada

What comes to your mind when you think of buying a car? The cost of the vehicle, collecting keys, driving home, things like that. But there’s more to it. Insurance is a vital part of car ownership and one that you have to pay attention to. It’s a legal obligation to insure your car before you can drive it in Canada. This is for your protection and that of other road users. But car insurance can be expensive.

The average cost of insurance usually varies among provinces. This is because each province has its auto insurance laws. On the high side are Ontario, British Columbia, and Alberta. These three provinces have the highest auto insurance rates in the country. Conversely, provinces with the lowest rates include Quebec, Prince Edward Island, and Nova Scotia. These provinces have an average auto insurance rate that’s below $1000.

How to get cheaper insurance rates

Given the high cost of insurance in most of Canada, it’s essential to find an affordable one. Generally, the factors that’ll determine your insurance rates, such as age, car model, driving record, etc., are outside your control. But you can still make sure things work in your favour when trying to get insurance. You can follow the following tips:

1.   Shop around and compare prices

Be prepared to get multiple insurance quotes unless you’re in provinces with only one auto insurance provider, such as Manitoba, British Columbia, or Saskatchewan. Negotiate and compare prices before going for the one you think is most suitable for you. All insurance companies want your money. The least you can do is make them work for it.

2.   Combine Insurance

If you already have insurance on your property, such as a house. You can combine your auto insurance with this to get a reduced cost.

3.   Get the right car

Your car model determines how much you pay for insurance. So, get a car with features that’ll reduce your insurance cost. Vehicles with safety features, less powerful engines, and high crash test scores usually have lower insurance rates. Also, don’t go for car models that are commonly stolen.

4.   Limit yourself to the coverage you need

Each province has its laws on insurance. It’s always good to protect your car within that limit and avoid any extra coverage that won’t affect your liability but will cost you more money.

In Conclusion

Car insurance in Canada can be expensive. But the cost varies across provinces. Several factors contribute to the rising insurance rates in the country.

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