Car insurance rate calculator: how rates are calculated

The amount of coverage you decide to purchase is the next thing used to calculate your car insurance rate. All provinces and territories have their own rules on the mandatory and minimum coverages, at least for accident benefits (medical coverage after an accident) and third-party liability insurance. For example, suppose you buy car insurance in Ontario. In that case, you need to have at least $200,000 of third-party liability insurance, but in Quebec, it's only $50,000. Typically, most people buy third-party coverage between $1-5 million. It costs more but it protects you from severe financial consequences after an accident.

Outside of the mandatory policies, you can buy optional car insurance. Popular options include collision coverage, which repairs or replaces your car after an accident and comprehensive insurance protecting your vehicle from vandalism, theft, and falling trees. Other policy endorsements include accident forgiveness, disappearing deductible, and roadside assistance, to name a few. All of these optional coverages will increase the cost of your premium.

Each provider uses a different insurance calculator to determine what rates they'll charge. For instance, some provinces operate under a public car insurance system. In contrast, others are private (Quebec car insurance is a hybrid of the two). 

British Columbia, Manitoba and Saskatchewan operate public car insurance systems. So, all drivers in those provinces must purchase their mandatory car insurance coverage through those Crown Corporations. 

Drivers have no room to negotiate or ask for better rates. The idea being car insurance will be cheaper for all. Currently, BC has the most expensive insurance, though. Drivers in those provinces can purchase the optional coverage (e.g. collision, comprehensive) from other private companies. 

All other provinces and territories have private car insurance. Private car insurance allows drivers to use insurance brokers to help them get the best car insurance rate in their area.

Car insurance quotes also vary from provider-to-provider because of the data about drivers and their claims collected by each company. Every car insurance company has several "risk groups," and companies charge premiums based on each group's claims experience. 

So, when a car insurance company goes through your driving profile (outlined at the top), they will place you in a group. Whenever a driver in that group makes a claim, the premiums for everyone could go up. To that end, if claims go down for the group as a whole, premiums could also go down. Suppose a provider sees a spike in claims from a particular risk group. In that case, their car insurance calculations will increase for that group. It might not be the case with another provider, which is why shopping for car insurance quotes every year ensures you'll always pay the best price. 

Car insurance companies may not legally consider the following, when deciding how much your car insurance premiums will be:

• Your credit history, including past bankruptcies. While some provinces have banned the use of credit scores, others say it helps evaluate a driver's risk and could result in lower premiums. 
• Your employment status
• How long you’ve lived in your current home
• Whether you own or lease your vehicle (though your lessor typically requires optional coverages like collision and comprehensive)
• Any period of time when you did not have car insurance 
• Accidents for which you were not at fault