How Car Insurance Premiums are Calculated in Canada

When you’re looking for car insurance premiums in Canada, and wondering how yours is calculated, it can be overwhelming. From vastly differing numbers to myths here and there, you’ve heard throughout your life and have seen online, it can be a lot.

So how are car insurance premiums calculated in Canada? In this article, we’ve broken it down for you in a way that will explain how your auto insurance is calculated, debunk myths, and what actually affects your payment price points. It isn’t as complicated as it seems! 

What are car insurance premiums?

When you sign up for car insurance, the insurer will charge you a premium on a regular basis. Every month, every six months, or whatever it is your plan will be – in exchange for insurance coverage. Essentially car insurance premiums are the monthly (or whatever plan you have agreed to with your insurer) payment for your insurance coverage. 

Policyholders can generally choose from a number of options to pay for insurance premiums. 

How are car insurance premiums calculated?

Common factors that go into calculating your insurance premiums are age, medical history, credit scores, life history, and more – such as the make, model, and year of your current car. How often you drive can also go into your insurance premiums. Whether you’re commuting, driving commercially, or a work vehicle also play a part. Personal plans may not cover accidents or damages to a work vehicle for example, and you may have to get a commercial car insurance coverage plan. 

Your driving record is one that may seem obvious, but a lot of drivers neglect to think about it. Any fender benders, accidents, or other issues that may or may not be your fault can all affect your insurance premiums. The number of drivers included (meaning other drivers that have used your car and their own records), the number of years you’ve been driving for, speeding tickets, how many years you’ve had your license, and so on. 

Where you live in Canada factors into your payments as well. Residing in a populous urban city will generally be higher due to the higher level of crimes such as theft, car break-ins, and accidents. The city and province will also play a part in dictating the minimum amount of insurance you are required to carry, but you also have a selection of coverage options to choose from. 

Factors that affect your car insurance rate

Factors that go into determining your car insurance rate are the biggest question most Canadians have when it comes to deciding on which insurance company to go with and which premiums they have access to. Most factors may seem obvious, while others you might not have thought of or knew go into determining your prices. 

Where you live in Canada

This may seem obvious but depending which province or territory you reside in within the country will affect and determine your rates. Some provinces may be more expensive than others right out of the gate. Your residing city and province will have a set rate you must have on you at minimum, while you still have a selection of coverage options to choose from with your premiums. 

Urban city or rural town

Urban, city living will generally affect your insurance rates as being higher due to a high population density and accident rate, theft, etc. Rural towns are more likely to be lower when it comes to premiums, but your coverage options may differ for what makes sense there. 

Driving record

If you’ve had a few accidents already or have other discrepancies on your driving records, it will affect your insurance premiums. If you have a spotless record, you can possibly pay less for your premiums. As well as if you’re a teenager just getting your first car – your premiums will be more expensive as it’s assumed you have less experience driving and may get into more accidents. 

Number of drivers (using your car)

This is one that many don’t think of or assume doesn’t apply to them since there is a myth roaming around that if you’re not the one driving your car, you may not have to pay damages or be liable. The number of people that will be driving your vehicle will affect your insurance premiums, due to the additional drivers and their records, etc. 

All drivers of your vehicle will be assessed, same as you, and that will affect your vehicles insurance premiums. 


Age is one of the most looked at factors when it comes to your car insurance premiums. Regardless of where you are in Canada, age will affect what you pay and how that fluctuates. Younger and new drivers are thought to be more inexperienced, thus will get into more accidents. Generally, once you hit 20 or 25, your premiums will go down. It is advised to revisit your insurance premiums every year and make sure that you’re getting the best coverage for your dollar. 

On the other side, older drivers once they hit around age 60 will start to see their insurance premiums start to go back up again, as driving reflexes, and vision can be affected as we get older, and therefore car insurance companies will tend to charge more as that factors in. 

Credit scores

Credit scores tend to dominate almost everything you can do in life, such as signing a lease or getting a home. Car insurance premiums are also in that category. If you have low credit or are new to your credit, you most likely will end up paying higher premiums until you have higher credit. 

Medical history

Medical history, including eye health and exams, play a part in your affected premiums. Something that may be considered a danger while operating a vehicle on the road such as seizures, migraines, or poor eyesight at night, can up your rates – and even put a few stipulations on your license, such as only being allowed to legally drive between certain hours of the day. 

A lot of users don’t take their medical records into account when you think of insurance premiums, as it’s just driving, and not anything serious, but insurance companies do take all factors and potential risks into consideration. 

How often you drive

How often you drive can affect your premiums as well and can be changed as your schedule and use changes. Such as with the Covid-19 pandemic – a lot of people weren’t commuting to the office every day, if at all, for over a year. Most insurance companies were offering lower rates to compensate for the lack of driving for most of their clients as a result. 

If you’re driving more often than not, whether it’s to or from work on a commute, or you do long-haul trips personally for vacations and otherwise, or you live far out from the city – that will change what you end up paying. Which also factors in with commercial or personal driving below.  

Commercial or personal

Do you drive commercially (a work vehicle), or do you use your car for personal errands and commute to and from work? If you drive a work vehicle but the insurance is set for a personal premium, it may not cover accidents and injury and damages the same way, if at all, that you would be covered for with a work insurance plan, as a commercial vehicle. 

How to save on your premium

Shopping around and comparing insurance costs between premiums. 

A myth that insurance companies will charge you more if they know you’ve been shopping around is non-existent. Be sure to find the best rates for yourself and what you need! 

Raise your deductible. 

A lower deductible can mean paying less out of pocket during an accident, but more in premiums. A higher deductible means that you’ll pay less upfront in premiums, but more during an accident. A higher deductible means lower premiums, but be sure to weigh the pros and cons. 

Reduce optional insurance wants or needs on older cars that you may not drive as much. 

If you have multiple cars, you can lower the extra bells and whistles you may not really need on the vehicles you’re not driving much, if at all. 

Bundling insurance with the same company or with multiple cars. 

You are able to bundle your car insurance premiums with multiple cars, often with the same company to keep it simple and in one place, and it can help to save on your premiums – bundling can save you money in the long run with multiple cars, as opposed to insuring them all separately.  

Take advantage of low mileage discounts.

A car monitoring device may be needed in order to get a low-mileage discount, but if you drive far less than you’re ever on the road – you may be eligible. Being less on the road means less chance of any accidents, and your insurance company will reward for that with a low mileage discount. It does depend on your insurance company and where you live, but under 12,000km or 7500 miles a year tends to be the mark. 

Low mileage discounts if you’re not driving as often or as far, can help quite a bit. 

How much does car insurance cost per month in Canada?

The Canadian average monthly car insurance costs are around $132 – however that will highly depend on where you’re located: province, city or rural, and the other handfuls of factors that go into what makes up your personal car insurance premium costs. 

What are the most frequent car insurance myths?

Myths around what actually hikes up your rate can be rampant and we’re sure you’ve heard a few over the years, or when you got your first car. 

Red cars are more expensive to insure? 

False. You can drive whatever colour vehicle you want; they won’t base your car insurance premiums solely on your preference of paint. 

If I cause a collision or get my car stolen – It will be covered. 

Not necessarily. Damage may be covered if you’ve included collision coverage into your premiums, and having your car stolen may not be covered at all unless you have a comprehensive listing that includes it specifically in your premiums as well. 

Higher rates equals more coverage. 

This is a popular myth that is also entirely incorrect. Paying more does not assume more coverage. For the exact same coverage between multiple insurance companies, the difference can be anywhere from hundreds to even thousands. It’s advised to shop around, compare, and choose what suits you the best. 

Males pay more than females. 

False – until you’re 25. This also depends entirely on where you live and what insurance company you’re going through. It isn’t a black/white scenario where this always happens, but numbers do show that males tend to be charged a higher premium than females do when they’re 25 years of age and under. Once you’re at that range, it tends to not matter. 

If you shop around, your rates will always go up.

This misconception is debunked. You have nothing to lose at all when looking for the best premiums for your vehicle – so never feel afraid to shop around and decide for yourself. 

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Updated date

January 10th, 2024

About the author

Nikki Lyka

Nikki Lyka is a reviewer and writer at that’s written about a variety of subjects from the best fantasy novels to travel guides and blogs. When she isn’t researching and typing up a storm, she’s generally found winding down with tea, video games, practicing aerial hoop, photography, and reading good horror novels.
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