Debunking 12 car insurance myths

1. A car’s colour affects its insurance cost

Let’s begin with that red car question. Do red cars cost more to insure?

No, they do not.

A car’s colour has no bearing on the price of insurance. It may have been a factor in certain places at certain times in the past, but present-day car insurance providers in Canada don’t use a vehicle’s colour to determine the price of insurance. Many individual vehicle characteristics do matter, but colour is not one of them.

2. Four-door cars cost more to insure than two-door cars

No, the number of doors on a car doesn’t affect the price of insuring it.

At least, not directly. Certainly, large cars tend to be more expensive than small ones, and expensive cars also generally cost more to insure. However, it’s not because of the number of doors.

If anything, two-door cars (coupes) are often pricier when it comes to insurance. High-performance vehicles commonly have two doors, and higher price points. These factors (among others) bring insurance rates up. Also, insurers have access to detailed data broken down by models and trim levels — they can calculate a price for each vehicle without having to count doors.

3. Parking tickets raise car insurance rates

No. Parking tickets do not affect your insurance rates.

Parking tickets are issued by either municipal governments or private companies. They don’t add demerit points to your license. In fact, they don’t have anything to do with your driver’s license at all, because a parking ticket, by definition, happens while no one is driving the car.

4. Automated speeding tickets raise car insurance rates

No, automated speeding tickets do not affect the price you pay for car insurance.

They also don’t add demerit points to your license. Just like with parking tickets, the reason for this is that there’s no way to confirm who was driving a vehicle at the time the system recorded the speeding infraction. You definitely still have pay (or dispute) the ticket, but you don’t have to worry about it raising the price of your car insurance.

5. Accidents always increase insurance rates

Nope. While it’s common for your insurance premiums to increase after you make a claim, it’s not a given that your rates will go up after you’ve been in an accident.

To start with, if you’re in an accident, but you aren’t at fault, your rates should not increase.

And, some insurance providers offer accident forgiveness. That means that they will ignore one accident (at least for the purposes of calculating the price of your policy). To qualify for accident forgiveness, drivers usually have to have a long accident-free period beforehand.

6. Only claims will increase car insurance rates

No. Insurance providers always offer claims-free or safe driving discounts. That means making a claim often will increase the price of one’s car insurance policy. However, claims-free status is just one of dozens or hundreds of factors that determine insurance pricing.

A much larger factor is the total cost of car insurance claims (for all customers) in a given period. Since insurance functions by spreading losses amongst many people, more losses mean higher rates for all those people. Rising repair costs, increased theft rates, and insurance fraud losses are all things that can raise someone’s insurance rates even if they haven’t made a claim themselves.

7. Insurers can charge whatever they want

No, when it comes to car insurance, companies in most provinces can’t charge whatever they like.

Car insurance in Canada is heavily regulated. In most provinces, insurance companies need to get approval from a provincial regulator before they change their car insurance rates. They can only charge customers based on their approved rates. They can, however, submit requests to adjust rates up or down based on loss results and trends.

8. Car insurance prices change seasonally

No. Some people believe that car insurance prices are lower in the summertime. This isn’t the case — car insurance prices may fluctuate throughout the year, but not because of the season.

In fact, some studies suggest that car insurance is cheapest in December, while others claim car insurance is cheaper during the autumn months. Basically, there are hundreds of specific factors that drive premium changes (as we established above). Insurance companies are always looking for ways to stay competitive, so they may change rates throughout the year based on changes to their underwriting results. Of course, any rate changes still need to be approved by provincial regulators.

9. Car insurance covers my belongings

No. Car insurance does not cover any of your belongings, unless they are attached to or directly related to your car. Even if your laptop gets stolen out of the back seat, it won’t be covered by your car insurance policy.

Personal and specialty property, whether electronics, clothing, sporting equipment, or any other property, is covered by your home insurance policy. Home insurance generally covers theft of your stuff anywhere in the world — not just when it’s stolen from your house.

Car insurance coverage is limited to things that are fixed to the car (like the stereo or roof rack) or accessories that are directly related to the car (like the spare tire). And even then, you’ll need to have theft coverage, which is part of optional coverages like comprehensive or all perils.

Fortunately, many insurance providers (including Square One) offer both home and car insurance. In Square One’s case, if you buy both you can save up to five percent on your car insurance.

10. Minimum liability coverage is enough

Legally, yes, carrying the minimum level of third-party liability coverage is enough. However, it’s not enough in a practical sense.

In most provinces and territories, you legally need to have at least $200,000 in third-party liability coverage to drive your car (drivers need $50,000 in Quebec, and $500,000 in Nova Scotia). Third-party liability covers amounts you’re required to pay when you damage someone else’s property or injure them.

$200,000 sounds like a lot, but many third-party liability claims exceed $1 million. Assuming the worst-case scenario, could you afford to pay hundreds of thousands of dollars to cover the difference? Third-party liability coverage tends to be relatively affordable, so there’s no reason not to bump it up to at least $1 million.

11. No-fault insurance means no one’s at fault

No. Many provinces have what’s known as no-fault car insurance. But this name is a bit of a misnomer. Under no-fault systems, drivers involved in car accidents are still assigned fault.

The “no-fault” part means that you only deal with your own insurance provider, regardless of which driver is at fault. Under other systems, if someone else was to blame for damaging your car in an accident, you’d need to deal with them and their insurer to get the repairs paid for. Under no-fault systems (like DCPD in Alberta and Ontario), your own insurer will pay to repair your vehicle no matter who is at fault.

12. Basic car insurance covers ridesharing and food delivery

No. If you plan to start doing any app-based driving gigs like Uber, Lyft, or Skip the Dishes (or any other moneymaking activity with your car, for that matter), make sure you talk to your car insurance provider.

Many insurance providers will not cover vehicles that are used for these types of work. And those that do allow for ridesharing or food delivery won’t permit it without the driver telling them about it beforehand. So, by default, you don’t have coverage for these types of activities. You need to speak with your provider first.

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