How to shop for high risk auto insurance in Ontario?
By Daniel Schoester | Published on 29 Jun 2023
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High-risk auto insurance is a type of insurance for drivers seen as high-risk due to their driving history. This includes drivers with a history of traffic violations, accidents, and claims. Insurance companies view high-risk drivers as more likely to get into an accident, which means they’re more likely to file a claim. As a result, high-risk auto insurance is usually 2-3x more expensive than standard auto insurance. In Ontario, annual costs range from $3,000 to $7,000. The average is around $5,000, but costs can exceed $20,000.
It’s important to note that high-risk auto insurance is not a permanent solution. As drivers improve their driving habits and build a better records, they can eventually switch back to standard auto insurance and enjoy lower premiums. It generally takes three to six years to see lower premiums. In the meantime, high-risk drivers need to improve their driving, such as taking defensive driving courses and avoiding risky behaviours on the road. This article will walk you through everything you need to know. Continue reading to learn tactics to compare companies and get the best rate.
High-Risk Auto Insurance Explained
High-risk insurance is a specialized form of coverage designed for individuals with serious driving convictions, payment issues, or poor driving/insurance records. It can be challenging to obtain a policy from most companies, but there are specific insurers specializing in high-risk auto insurance.
In high-risk car insurance, coverage types are similar to standard insurance, but there are some differences. Fewer providers offer high-risk insurance, resulting in limited options. The premiums are substantially higher due to the level of risk involved. Payment options may also be limited, with certain restrictions and higher deductibles.
In cases where high-risk providers refuse coverage, drivers can turn to the Facility Association, a last-resort option for those who cannot find insurance elsewhere. However, Facility insurance premiums are significantly higher, ranging from $7,000 to $10,000 or more.
Maintaining a clean driving record is crucial to transition out of the high-risk category. Over time, as tickets, claims, or accidents are removed from a driver’s record, they can work towards lower monthly payments and ultimately obtain standard insurance again. The time needed to move out of the high-risk category varies depending on the individual’s circumstances, but it generally takes three to six years. The Financial Services Regulatory Authority of Ontario (FSRA) protects consumers’ rights, including those classified as high-risk drivers.
Why you may need high-risk auto insurance
It’s important to note that being considered high-risk doesn’t mean a driver is terrible. Sometimes, accidents and violations can happen to even the most careful and responsible drivers. However, insurance companies use statistical data to determine which drivers are more likely to get into accidents and file claims. Insurance companies then determine your insurance rates with this probability. The following table details the most common reasons a driver needs high-risk auto insurance.
| Factors | Explanation |
|---|---|
| Impaired driving | Driving under the influence of drugs or alcohol is dangerous and risks you and others on the road. Additionally, if you are charged with impaired driving, you must obtain high-risk insurance automatically. |
| At-fault accidents | Engaging in risky behaviour, such as causing accidents, can increase costs. It’s not just the first at-fault accident that can raise your costs, but having multiple collisions in a short period (more than 2 in 3 years). However, you will not be categorized as high-risk if you are not at fault for an accident. |
| Careless driving | Driving recklessly or without concern for others can lead to accidents and injuries. This includes being distracted while driving and making poor decisions on the road can increase your chances of making a claim, making you a higher-risk driver. |
| Stunt driving | Participating in street racing, performing stunts on city streets, and other reckless driving practices are considered serious offences. Receiving a ticket for any of these actions can significantly increase your insurance rates. |
| Missed payments | You must make payments or ensure you have sufficient funds, and non-payment may result in cancelling your insurance policy. In such a scenario, you may need to utilize a high-risk provider. |
| A lapse in insurance | Insurance companies prefer drivers who have maintained continuous insurance coverage for several years. Therefore, you may be viewed as a higher-risk driver if you have a break in your coverage. |
| You’ve never been insured | Getting insurance as a new driver can be expensive, especially if you’ve been insured before and are considered high-risk. To save money in the future, it’s a good idea to get added to a parent or guardian’s policy as soon as you get your licence. This will help you establish an insurance history. |
| Licence suspension | If your licence is suspended, it may result in higher premiums or needing insurance from a non-traditional provider. |
| You’re a young or new driver | Insurers may consider you high-risk if you have little experience since young and new drivers are statistically more likely to cause accidents. |
| Vehicle | Your vehicle might need high-risk coverage based on its type. Modified cars, those at a certain age or with specific features, may not be eligible for standard insurance plans. |
Facility Insurance for High-Risk Drivers
Drivers who can’t qualify for high-risk insurance must turn to the Facility Association. This is an industry-funded organization and a last resort for drivers who cannot obtain insurance. It’s important to note that Facility insurance rates are generally higher than those high-risk insurers offer. Additionally, premiums and deductibles can be substantially more expensive than standard options due to the increased risk of claims.
Understanding Coverages of High-Risk Auto Insurance
You’re legally required to have four types of car insurance in Ontario. Driving without these coverages will result in severe penalties. However, many drivers add additional coverages at an extra cost to protect themselves. You will only receive insurance coverage from your included events. You must pay out of pocket if an uninsured event occurs. Since the seven types of car insurance in Ontario are covered in detail in a separate article, the table below provides a high-level overview:
| Name | Mandatory Coverage | Description |
|---|---|---|
| Third-Party Liability Coverage | $200,000 | Pays for damages to the other party when you cause the accident. |
| Accident Benefits | $65,000 | Covers the healthcare and recovery expenses of you and your passengers. |
| Uninsured Automobile Coverage | $200,000 | Protects if you are involved in an auto accident with an uninsured driver. |
| Direct Compensation Property Damage | $200,000 | Repairs your vehicle and what’s inside when you’re not at fault. |
| Collision Coverage | N/A | Protects damage to your vehicle caused by a collision with another object or vehicle, regardless of who is at fault. |
| Comprehensive Coverage | N/A | Broadly protects damage to your vehicle caused by a non-collision event, such as vandalism or theft. |
| Specified Perils Coverage | N/A | Protects specific losses or damages to your vehicle, such as fire and hail damage. |
Furthermore, it’s essential to understand the exclusions of your covered events. These are coverage gaps that your insurer won’t pay if they determine it’s happened. These exclusions can vary from company to company, so it is best to read carefully through the policy details before signing anything. Standard exclusions include coverage limits, age restrictions, and certain driving activities such as racing or off-roading.
The Pros and Cons of High-Risk Auto Insurance
| Advantages | Disadvantages |
|---|---|
| – Allows drivers with a poor driving history to operate legally – Helps drivers rebuild their driving record | – Higher premiums compared to standard auto insurance – Affordability issues for some drivers, as high premiums can strain their budget and cause financial stress |
Advantages
One of the main benefits of high-risk auto insurance is that it allows drivers with a poor driving history to operate a vehicle legally. This is important because driving without insurance is illegal in Ontario and can result in hefty fines and even legal charges. With high-risk auto insurance, drivers can get back on the road and begin to rebuild their driving record.
Disadvantages
However, it’s not all sunshine and roses regarding high-risk auto insurance. The premiums for high-risk auto insurance are typically higher than standard auto insurance. High-risk drivers are more likely to get into accidents and file claims, meaning insurance companies face more financial risk.
Another downside of high-risk auto insurance is that it can be difficult for some drivers to afford. The high premiums can strain a driver’s budget, making it hard to keep up with other expenses such as gas, maintenance, and repairs. This can lead to financial stress.
Five Factors to Compare High-Risk Auto Insurance Policies
Comparing car insurance based on several factors is crucial when shopping for high-risk auto insurance in Ontario. These include the cost of the policy, deducible, the scope of coverage, the reputation of the insurance provider, and the availability of discounts or cost-saving features.
1. Policy Cost
Your monthly premium is the amount you pay every month. While finding an affordable policy is essential, ensuring that the coverage meets your needs is equally vital. Be aware of policies that lure you in with lower premiums but have lower coverage scopes or significantly higher deductibles.
2. Deductible
The deductible is the amount you must pay out of pocket before the insurance coverage kicks in. For example, if you experience an accident with damage that costs $2,000 and your deductible is set to $500, you will pay the first $500, and the insurance company will pay the remaining balance.
Deductibles can significantly impact the cost of premiums. While a higher deductible results in lower monthly payments, it also increases out-of-pocket expenses when accidents occur.
3. Scope of Coverage
The scope of coverage is the amount of protection you receive. This is what you’re paying for, so ensuring you receive good value is beneficial. There are two ways to think of your coverage; horizontal and vertical. Horizontal coverage refers to the variety of events you’re covered for. Meanwhile, vertical coverage refers to the coverage limit of each covered event.
a) Covered Events
Your insurance will only protect you from events explicitly stated in your policy. This means you won’t receive coverage for events that aren’t included. Some policies may only cover certain accidents or damages, while others offer more comprehensive protection. Understanding the types of coverage you need to protect yourself as a driver is worthwhile.
b) Coverage Limits
Each covered event has a limit of protection. If your damages exceed this limit, you must pay any additional costs. For example, if you have a coverage limit of $25,000 for property damage and experience an accident with total damages of $30,000, you must pay the remaining $5,000. As such, having higher coverage limits is worthwhile. However, this will increase your monthly premiums.
4. Reputation of Insurer
Evaluate the reputation and customer service record of the insurance provider. Look for a company with a strong track record of excellent customer service and fair treatment of customers. Reading reviews and seeking recommendations can help gauge the reputation of different providers.
5. Additional Discounts
Explore any available discounts or cost-saving features offered by insurance providers. These may include discounts for safe driving, bundling multiple policies, or other incentives. These discounts can help you save on premiums while obtaining the necessary coverage.
How to Get Cheap High-Risk Auto Insurance
It is important to note that high-risk auto insurance in Ontario can be more expensive than regular auto insurance due to the increased risk of insuring drivers with poor driving records. However, there are ways to reduce the cost of your insurance premiums.
Take a Defensive Driving Course
One way to reduce the cost of your high-risk auto insurance in Ontario is to take a defensive driving course. Completing a certified course demonstrates to insurance providers that you are committed to becoming a safer driver and can lower your insurance premiums.
Increase Your Deductible
Another option is to consider a higher deductible. This is the amount you’ll pay when making a claim. While a higher deductible means you’ll have to pay more out of pocket if you get into an accident, it can also lower your monthly insurance payments.
Bundle Your Insurance
Another way to reduce the cost of your insurance premiums is to bundle your auto insurance with other types of insurance, such as home insurance. Many insurance providers offer discounts for customers who have multiple policies with them.
Four Common Mistakes to Avoid When Shopping for High-Risk Auto Insurance
1. Failing to Shop Around and Compare
One of the most common mistakes people make when shopping for high-risk auto insurance is neglecting to shop around and compare policies from different providers. Not all insurance providers offer the same rates and coverage options. Take the time to research and compare car insurance policies to find the best Ontario insurance company for your needs.
2. Not Understanding Coverage Options
It is crucial to fully understand the coverage options available to you when choosing a high-risk auto insurance policy. Different policies offer varying levels of covered events and limits. Familiarize yourself with these options and choose the coverage that aligns with your needs.
3. Dishonesty about Driving History
Being dishonest about your driving history when applying for high-risk auto insurance can have severe consequences. It may be tempting to withhold information about past accidents or traffic violations to obtain a lower rate. However, this can result in policy cancellation or denied claims. Always be honest about your driving history when seeking high-risk auto insurance.
4. Neglecting to Ask for Discounts
Many insurance providers offer discounts or cost-saving features that can help reduce your premiums. Typical discounts include safe driving records, anti-theft devices, and multiple policy discounts. Remember to ask about these discounts and take advantage of them if you qualify. Failing to do so may result in missed opportunities for savings.
The Bottom Line
Finding affordable and reliable high-risk auto insurance in Ontario can be daunting. With so many factors to consider, it is essential to research and compare different policies before deciding. Understanding the cost of the policy, the scope of coverage, the reputation of the insurer, and the availability of discounts are crucial elements to consider when shopping for high-risk auto insurance. Furthermore, avoiding the common mistakes mentioned above can help you find an affordable and reliable policy. With the proper knowledge and guidance, you can be sure to find a policy that meets your needs at a price you can afford.
