Four Car Insurance Myths in Canada: Setting the Record Straight

Wednesday, May 15, 2013


Car insurance mythsAs Alberta's teenage drivers get their license, fully aware of the rules of the road, they were likely taught at some point in the course of their driver’s education that Alberta car insurance is something that they'll have to buy if they want to register their car in the province.

But what may have not been addressed as much is that there are a variety of half-truths and misinterpretations about coverage in Canada that can give the country's youngest motorists the wrong impression about coverage.

The following tips should help set the record straight on car insurance myths in Canada so young people can make more informed decisions.

1. Car colour affects rates

Before purchasing a car, a lot of thought and consideration is put into deciding what colour it will be. While some prefer to buy the vehicle that's their favorite shade, there are suggestions out there that if people have any preference toward red, they should rethink their colour decisions. Apparently, some ill-informed motorists are under the impression that colour determines the price of auto insurance, theorizing that provincial officers keep a close watch on red cars, assuming that they'll drive fast.

In reality, colour has nothing to do with the establishment of premiums. Certain vehicle factors may influence rates - such as how old the vehicle is, its make and model and its safety record - but colour is just one of those car insurance myths.

2. Insurers are free to determine their own prices and rules

Something else that has taken on a life of its own is the notion that insurers make up their own rules as to what isn't and is covered. As the Insurance Bureau of Canada notes, however, this belief is also flawed.

That's because the automotive industry is highly regulated by local provincial governments. Lawmakers are in charge of how much insurance companies can charge and what situations are provided for. Furthermore, if any changes wish to be made among one or several insurers, they have to be reviewed by the government and given approval before they can be implemented.

3. Premiums increase the older a person gets

Another car insurance myth is that as people age, the more likely it is that they're premiums will elevate. In reality, age may actually help people keep their costs down.

As a general rule, insurers like to reward policyholders for their patronage. As a result, the longer they stay with the company, the more likely it is that they will be given a discount, provided that they maintain a safe traffic history record. And multiple studies suggest that they will, as traditionally accidents are more frequent among young, inexperienced motorists versus those who have had their license for more than a decade.

4. Flooding is provided for with car insurance

There's also some misunderstanding on flooding and whether motorists are covered by high water levels. As homeowners may be aware, Alberta home insurance traditionally does not provide for overland flooding, or when water enters a home as a result of rainfall or breach of a nearby river. This rule also applies to automotive coverage.

The main reason why flooding isn't covered is due to the fact that flooding is a rarity in Canada. IBC points out that if it were to be provided for by insurers, it would come at a significant expense for carriers, which ultimately would be passed on to consumers in the form of higher premiums.

The IBC has a list of several other myths as they relate to insurance that young motorists may want to peruse.