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By Matt Hands, RateHub.ca
Special to the Financial Independence Hub
You might only review your car insurance once a year, but in times of financial hardship, exploring all opportunities to cut back is a smart idea. Whether your car is sitting parked, or you’re only driving for essentials like groceries and medicine, you should know two things.
First, the industry is adapting to the current climate in COVID-19 by offering some payment deferrals and flexible payment options. Second, there are things you can do, be it in a pandemic or not, to save money.
Auto insurance industry response to driving less
The industry’s initial response, almost unanimous in nature, was to offer payment deferral options allowing individuals to delay their monthly premium payments for a defined period of time: ideally once your income returns to expected levels. In addition to this, some providers are waiving non-sufficient funds charges (NSF fees), but be mindful that your bank could still charge you the fee, so it’s best to check with them.
In a more surprising move, many insurers have relaxed their rules about using your vehicle in the shared economy: e.g. uber, lyft, etc. Depending on your provider, you may also be able to get a coverage extension at no additional charge allowing you to drive your car for commercial reasons to make ends meet. Typically, you’d need a special coverage addition or endorsement on your policy to drive and make money from services like Uber Eats.
More recently, the provincial government announced they will allow the Ontario auto insurance industry to provide premium rebates in the otherwise regulated environment. Now, we’re seeing some more tangible reductions being offered to Ontario drivers. The various relief options can be unique to each provider, so make sure you contact your insurer to find out what potential discounts and flexible payment options are available to you.
Automatic discounts
A number of insurers are applying automatic discounts, which don’t require the policy holder to do anything. Allstate, Pembridge, Pafco, and Travelers are issuing a one-time payment equal to about 25% of your monthly premium. Gore Mutual decided to give a payment worth 20% of 3 months of premium payments. iA insurance is offering the same 20% premium discount, but over 2 months, and used as a credit on your account. L’unique, SSQ, and LaCapitale are both offering a 20% rebate applied as a credit for one month. Unica is offering a 15% break on premiums for April, May, and June.
Passive discounts
Other insurers are taking a more passive approach, which requires the policy holder to initiate the conversation about discounts. Aviva, Economical, Sonnet, and Family will reduce your car insurance premium by 75% if you aren’t driving anymore, or 15% if you’re driving less. They still don’t want you driving for commercial purposes, though. CAA is offering a 10% base rate reduction, Unica is doing the same by 15%. Desjardins and The Personal are calculating their discounts by looking at 3 months of premiums and reduced driving to figure out your unique discount.
Actions you can take to save on car insurance
Deferral should be a last resort, as you will still have to pay the premiums owing eventually on top of future payments. But don’t fret, there are some other ways to save on car insurance.
Reducing the kilometres on your policy
You may not remember, but when you first get car insurance quotes, you’re asked how many kilometres you drive in a year and your daily commute to work.
Since this has likely changed since the start of the pandemic, it’s important to update your policy based on your current situation. You could save 5-15% with this simple change alone.
Reducing your coverage amount
Comprehensive and collision insurance aren’t required as part of a basic auto insurance policy, but they’re standard additions to most. If you own the car outright, you can call your provider to ask if it’s worth keeping these coverage additions on your policy. Even temporarily removing these coverages while you’re not driving can save you 10-20%, depending on the age of your vehicle. Collision insurance covers your car when you’re in an at-fault accident, while comprehensive insurance protects your vehicle from perils while it’s parked, including fallen trees, vandalism, and theft. You could also reduce your third-party liability insurance to the provincial minimum instead of what you’re currently paying, which is likely $1-2 million.
Placing your insurance on hold
While it varies by province, with private car insurance in Alberta or Ontario, you can put your insurance on hold (i.e. a suspension of coverage). There are required forms to fill out, and it will temporarily remove liability, accident benefits, and DCPD (in provinces where it exists) from your policy until you reinstate the coverage. Essentially, you’re removing all coverage for your car, which also means you won’t be driving it.
Driving without insurance is illegal across Canada. So, even if you needed your car for a quick grocery store run, if you’re caught, there are severe consequences. Though the other risks are limited, if your car is hit by a tree or rolls down the driveway and hits another vehicle, you’ll want that insurance to be there. Consider at least keeping comprehensive insurance active to protect from the risks associated with a parked car.
Usage-based insurance
Car insurance is based on stereotypes and historical data. So while you might be a great driver, your Toronto car insurance will always be more money than your friend who lives in Oakville.
Usage-based insurance levels the field, however, by looking at your personal driving behaviours, including speed, distance, how hard you brake, and how you handle turns. Despite some privacy concerns, it’s growing in popularity, because the early results are saving drivers up to 30% off their monthly premiums.
Allstate, BelairDirect, CAA, Desjardins, Intact, Onlia, and TD are the current insurers offering the service. It’s an app on your phone that tracks your driving behaviours, and if you can virtually prove you’re a safe driver, then you’ll see a discount. And if you’re wondering, no, there are no premium increases for lousy driving and insurers do maintain the data is private and secure. Also, know that manufacturers are starting to build the technology into their new cars. It might be the future of auto insurance as we know it.
The bottom line
Regardless of the current situation, know there are always ways to save on car insurance. Right now, call your provider and speak with them about your options. If you’re not satisfied, it’s time to compare car insurance quotes online from other companies that are showing a willingness to work with their drivers to find solutions.
Matt Hands is the Business Director of Insurance at Ratehub.ca, a website that compares insurance rates in Canada, as well as mortgage rates, high-interest savings accounts, chequing accounts, and credit cards with the goal to empower Canadians to search smarter and save money.
