3 Things You Need to Know About Car Insurance in Alberta
You know the drill. You buy a car and you buy car insurance. The two go together like peanut butter and jelly, just without the deliciousness. Insurance is the fact of life we all pay in order to keep us from owing someone a ton of money if we get into an accident.
Have you ever wondered exactly what you pay for with insurance premiums? Here are three things you may not know about your insurance premiums:
Insurance Rate Maximums are Preset
Contrary to what you might think, your car insurance premiums are not determined by a Price is Right-type of Spin the Wheel game. Insurance rates for basic coverage (third party liability & accident benefits) are organized on a grid formation with maximums depending on a number of factors.
Things like how long you’ve been driving, the number of at-fault driving claims and how much third-party liability coverage you choose can all influence where you sit on this grid and therefore how much you pay in car insurance premiums in Alberta.
Less than 10% of Alberta drivers pay the grid maximum in their classification. Even if you have a few speeding tickets, shopping around for the right rate can save you money.
Premiums are Reviewed Annually (And you have a say...sort of)
Because Alberta’s auto insurance industry is privatized, the Alberta Automobile Insurance Rate Board (AIRB) was created to oversee rate-setting and insurance maximums. A private citizen is elected as the “consumer representative” on the board and their job is to collect feedback from the public about their insurance experience.
There is also an annual review to set maximum grid guidelines for insurance premiums and review individual insurance companies on their own rating systems. This process is started with an open meeting held in Edmonton.
Your Premium Dollars at Work
According to the AIRB, every dollar of your premium goes towards settling claims, administrative expenses, taxes and net profits. Taxes and profits are fairly straightforward so let's talk about the claims and administrative costs.
- Claims: Not surprisingly, the majority of the money collected goes toward settling claims. Over 65% of premiums went directly to these costs in 2011. These funds were used to pay for personal injuries as well as damage to vehicles and other property.
More interestingly, a portion of this money was paid to the government to cover medical costs for accident victims - to the tune of $90 million in 2011.
- Administrative Costs: This pays for all the people, places and things required to make our great insurance system running. Everything from advertising to salaries. Commissions are also paid out of this line and it accounted for about 20% of your car insurance premiums in 2011.
If you think you're overpaying for car insurance, get a free online quote here and compare rates in your area.