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How much do Canadians know about auto insurance?

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So we’ve all heard about the importance of financial literacy – but what about auto insurance literacy? After all, car insurance is a requirement for all drivers in Canada (and it directly affects our bank accounts). 

A recent survey from PC Insurance revealed some of the most common auto insurance misconceptions held by Canadians. Here, we cover the truth about each one, so you can further understand the ins and outs of your coverage.

Key takeaways on auto insurance misconceptions in Canada

  • 22% of Canadians believe their auto insurance rate stays the same after a move.
  • 25% of Canadians believe auto insurance premiums rise as they age.
  • 32% of Canadians believe parking tickets have an effect on their premium.
  • 16% of Canadians believe they can’t change or cancel their plan until renewal.
  • 46% of Canadians believe their credit score has no effect on their premium. 

Common auto insurance misconceptions (survey results)

While the survey revealed that 86% of Canadians were confident with the coverage they had in place, it also revealed a gap in knowledge when it comes to the topic of auto insurance – here are the numbers PC Insurance found, based on the responses from 1,500 Canadians. 

Does moving impact my car insurance rate?

22% of Canadians believe their auto insurance rate stays the same after a move.

Moving does in fact have an impact on the price you’ll be paying for car insurance. Insurers can look at the exact neighbourhood you’re living in to determine your rate – so just because you’re moving from one end of the city to the other, doesn’t mean your premium will stay the same. 

Areas with a high risk of crime also come with high rates. This makes sense considering you’re more prone to becoming a victim of car theft, car vandalism, and car insurance fraud. Suburban places also tend to see more expensive rates. In these areas, vehicles are used to get anywhere and everywhere, leaving insurers more susceptible to paying out a collision insurance claim.

The city of Brampton is known to be one of the most expensive areas for car insurance, and our own user data confirms this – drivers from this suburb saw an average monthly rate of $413 (the highest among all Ontario cities). Comparably, users who came to us looking for Toronto car insurance saw an average monthly rate of $327. 

While there have been talks of prohibiting the use of postal codes when quoting customers in some parts of Canada, regulations have yet to be put in place to ban insurers from doing so.

Check out: How car insurance rates are calculated

Does older age come with higher car insurance rates?

25% of Canadians believe auto insurance premiums rise as they age.

Generally speaking, this is not the case – auto insurance premiums actually tend to go down as you age. Insurers not only value the extra driving experience, but they also look at the statistical risk factors your demographic brings. And because young drivers get into accidents more frequently, cheap auto insurance is harder to find early on. 

Those 16 to 20 years old who recently came to us to compare car insurance quotes in Ontario saw an average monthly rate of $494 (females) and $536 (males). On the other hand, users between the ages of 60 and 69 saw a much cheaper average of $148 (females) and $120 (males).

Keep in mind, however, that elderly drivers may see their auto insurance premiums go up once again – you’ll be placed in a higher-risk age group once again for obvious reasons. 

Read: The average cost of auto insurance in Ontario by age

Do parking tickets affect car insurance?

32% of Canadians believe parking tickets have an effect on their premium.

While parking tickets certainly don’t have a positive impact on your wallet, they won’t have a negative impact on your car insurance rate. Unlike other driving infractions – such as going over the limit and failing to signal – a parking ticket isn’t classified as a moving violation. Because of this, it also won’t end up on your driver’s record which is what insurance companies look at when calculating your rate. 

This is the same case for tickets issued from speed cameras and red light cameras. Unlike police-issued tickets, no one is physically there to identify the driver who commits the infraction. It would be unfair to ding your driving record (along with your low-risk insurance profile), just because you lent out your vehicle to a careless friend.  

Can I cancel my car insurance at any time?

16% of Canadians believe they can’t change or cancel their plan until it’s time for renewal.

Contrary to popular belief, you can cancel your auto insurance policy at any time – but it’s important to know that driving without the right coverage in place is illegal all across Canada. On the other hand, if you’re casually comparing car insurance quotes (with us, of course), and you see a cheaper rate, no one is stopping you from switching providers today.

However, there are also a few reasons you may want to hold off until the end of your policy term. Many auto insurance companies will charge a penalty for doing so, also known as a short rate fee. And if you’ve already paid for your entire year’s worth of coverage at once, you might not be able to recover the full, unused amount. 

So before you call your insurer to cancel, make sure you know what you’re getting yourself into – and that the benefits outweigh the consequences. 

Does my credit score affect my car insurance quotes?

46% of Canadians believe their credit score has no effect on their premium. 

While almost half of the surveyed participants believed this to be true, they weren’t entirely wrong. When it comes to the relationship between your credit score and your auto insurance rate, the lines become a bit blurred – it essentially comes down to the province you live in. 

Credit score can't be used as a quoting factor for auto insurance in Newfoundland and Labrador or Ontario. On the other hand, it can be used to calculate car insurance rates in Alberta – but insurers here need explicit consent before running a credit check, and customers also have the right to say no. And while auto insurance companies in Nova Scotia can ask for your credit score, they can't deny you coverage for refusing to share. 

The other provinces in Canada don’t have clear rules and regulations about the use of credit score. But if you live in a public auto insurance province (British Columbia, Saskatchewan, or Manitoba), know that credit history isn’t generally used as a quoting factor by government providers. 

Read: Can auto insurance companies check my credit score?

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Other auto insurance misconceptions

In 2021, we also conducted our own survey to determine some of the biggest auto insurance misconceptions held by Canadians – and while you can revisit that post to learn more, here’s a recap of a few interesting (but false) beliefs we found:

55% of Canadians believe that auto insurance follows the person, not the car – This is generally false as when you borrow your friend’s vehicle, you’re essentially also borrowing their coverage. One exception to this rule, however, would be if you have a non-owner auto insurance endorsement. In this case, your personal auto insurance policy will also apply to a rented or borrowed vehicle.

44% of Canadians believe car insurance rates only go up following a claim – There are many other reasons you could see a rate increase. And while you may have control over some of these (e.g. adding a new driver to your policy, or getting a ticket conviction), there are also many outside market conditions that could affect your rate. For example, ongoing inflation has a direct impact on your auto insurance premium – as the cost of car parts and repair services go up, so will the cost of a claim (and insurers need to make this money back somewhere).

24% of Canadians believe how much they drive doesn’t impact their car insurance rate – This is not the case. Insurers look at your daily and annual commute as a quoting factor – the more you drive, the more expensive your premium will be. That being said, one simple way you can save on your auto insurance premium is to drive less

The bottom line

Car insurance can be a confusing topic, but it doesn't have to be. Separating fact from fiction can help you make better decisions when shopping around for your next insurance policy – and if you're currently on the hunt, don't forget to compare car insurance quotes with us. 

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