How to estimate the cost of insurance before buying a car

If you're in the market to buy a car, one of the questions that’s probably top of mind is: how much will my car insurance be? 

While it’s impossible to pin down an exact number without speaking to a broker or insurance agent, there are ways to gauge the cost of car insurance before buying a vehicle. 

Let’s go over all the factors you’ll need to consider.

Do you need insurance before you buy a car?

Yes. Car insurance is mandatory in Canada. So no matter the number, you're gonna have to fork it over each month. 

Depending on which province you live in, car insurance will either be administered via private insurance companies, or via a government-regulated corporation.

What’s your driving record and behaviour like?

Generally speaking, the better and safer a driver you are, the lower your premiums should be. On the other hand, if you have at-fault collisions on your record, speeding tickets, or other violations, you can expect your insurance rates to be higher because you present more of a risk to the insurance company.

If you’re confident that you’re a safe driver, you might consider options like usage-based insurance, which relies on telematics to monitor things like how hard you brake, how fast you accelerate and take corners, and so on. The big perk of UBI programs is that they reward safe drivers in the form of discounts on their premiums. But beware that in some provinces, like Quebec and Ontario, you can also be penalized in the form of surcharges for risky driving behaviour.

How old are you, and what gender do you identify as?

Age is pretty important when it comes to determining car insurance premiums. Generally speaking, teenagers pay the most expensive premiums. Because they have fewer years of driving experience under their belts, they’re considered riskier to insure in the eyes of insurance companies. As a result they pay higher rates.

Besides age, however, gender is another important factor. Depending on the province you live in, insurance companies can use gender as a factor in determining your premiums. And the data don’t look great for males. According to numerous studies, men are riskier drivers than women. They get into more collisions than their female counterparts, are more likely to drive under the influence of substances, and to commit traffic violations. This also means male drivers tend to pay the highest in premiums.

Where do you live, and where will your car be parked?

Some postal codes have higher instances of claims than others. For example, if you live in a city like Toronto, which typically has higher collision and theft rates due to a denser geography and higher population, you might see higher rates. But depending on which part of Toronto you live in, those rates could fluctuate.

Your insurance rates are also impacted by where you park your car at night. For example, having your own private garage or driveway as opposed to having to park on the street, where break-ins and theft are easier to commit, can score you lower rates. Insurance companies look at the likelihood of your vehicle becoming damaged or stolen and price that risk accordingly.

How do you plan to use your vehicle?

How you use your vehicle also matters. If you're driving every day to and from work, as opposed to just a weekly grocery trip, there's a difference. The more frequently and the further you drive, the higher the risk of a collision. 

Similarly, the less frequently you drive, the lower you can get your rates. For instance, maybe your work commute has changed due to the pandemic. This could mean you’re driving fewer kilometres annually, which would translate to lower rates. The less time you're spending on the road, the less chance you have of getting into a collision, so be sure to adjust your annual usage with your insurance provider as soon as possible. 

If you're using your personal car for business purposes, — e.g. ride-sharing, food delivery or transporting materials and goods — you can either upgrade to commercial insurance or have commercial coverage added to your existing policy. That could lead to higher rates depending on the insurance provider. Some rideshare employers, like Uber and Lyft, do provide some coverage for their employees, but it’s still important that you’re personally covered. Not doing so could lead to your policy being voided or cancelled and you being labelled a high-risk driver, which would make you even more difficult to insure in the future.

How much coverage are you looking for?

Another factor to consider is how much coverage you want on your vehicle. The more you get, the higher your premium. Fortunately, you can customize your policy and what kind of coverage you feel is most important for you.

But first, it's important to know the difference between comprehensive and collision coverage, with the former covering damage caused by non-collision events, including theft, vandalism or a natural disaster. The latter, meanwhile, will cover the costs of damage to your car if it collides with another vehicle or object.

If you want both, you’ll pay higher premiums. Consider your car, your risk of an accident, where you live, how often you drive, etc. If you have a new, pricier car, drive it frequently, and have a considerable commute, you might want both collision and comprehensive coverage. But if your car is older and you can afford to pay for repairs out of pocket and you don't drive very often, you may not need both.

What deductible are you willing to pay?

Let's not forget how a deductible – the amount you're required to pay for repair costs in the event that you are at-fault or partially at-fault for a collision – can factor into all of this. 

Naturally, if you choose a higher deductible when you create your policy or when you change it at renewal, you will lower your insurance premiums because you're agreeing to take on more of the claim costs and, therefore, the risk. 

While this might sound like a magical cost-cutting solution, you should carefully evaluate whether you'll actually be able to afford what you've agreed to pay.

What type of vehicle do you drive?

Newer cars tend to be more expensive to insure because they're worth more, while used cars tend to be cheaper to replace, and therefore cost less to insure.

In general, the cheaper your vehicle is to replace, the lower your insurance rates will be. For instance, a sports car will have you paying higher premiums than an average sedan. That said, the safety features of more expensive vehicles can help lessen your insurance costs because insurance companies also look at the odds of your car being stolen or damaged in a collision. So if you have an anti-theft device installed on your vehicle, you could score lower rates.

According to the Insurance Bureau of Canada (IBC), "Each year, automobile theft costs Canadians close to $1 billion, including $542 million for insurers to fix or replace stolen vehicles, $250 million in police, health care and court system costs and millions more for correctional services."

It's worth looking at the IBC's Top 10 Stolen Vehicles list. While you're at it, you might also want to check out the IBC's How Cars Measure Up, which ranks insurance claims statistics by vehicle and can give you a hint as to what make and model might be less expensive to insure.

And lastly, if you decide to go green and buy an electric vehicle, you might pay slightly higher premiums because of the expensive replacement costs associated with the battery under the hood (and the fact that EVs are generally more expensive to buy than gas-powered vehicles). But on the other hand, you could get some type of “green discount” from your insurance provider for driving a hybrid or EV.

Save money by getting an online car insurance estimate 

Different insurance companies offer different insurance rates for different cars, and you might be paying more just because of the one you've chosen, so be sure to shop around. Consider those that have better reputations, pay attention to customer reviews, and compare car insurance rates in your area. 

You can use an online car insurance estimator, though those tend to be less accurate, or you can use a free rate comparison website where you can fill in your personal details (e.g., age, gender, postal code, car make and model, etc.) and get a more accurate quote in just a few minutes.

Understanding these important factors will better prepare you for when you inevitably wonder: how much will my insurance be?