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Money Minute: Why car insurance rates vary so much

Ever combed through an auto insurance policy and gotten that awkward vibe that says, “this could be a scam and I wouldn’t know it.”

Don’t worry; your skepticism is a universal thing or at least an inherent worry of your fellow Canadians.

A survey by TD Insurance found that just over half of us (52 per cent) wouldn’t ask their insurance provider to elaborate on the things they don’t quite understand in the policy.

Of those, 31 per cent think the details would be too complicated, 31 per cent say they don’t have time, 23 per cent are just straight up embarrassed for not knowing. Then there’s the 19 per cent of disinterested Canadians who don’t really care about their insurance policies or their stupid fine print.

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It probably all stems from the idea that we should know more than we do. Chalk it up to the age of “Googling” as a verb or maybe it’s the endless stream of comparison tools that do our work for us.

That might be why 37 per cent of Canadians don’t bother to skim the fine print on their policies.

But why do we pay what we pay for car insurance, what costs are in that fine print and how are insurance providers arriving at these premiums?

“Insurance companies look at many factors to determine what the premium is that a person will be charged for auto insurance,” Pete Karageorgos, spokesperson for the Insurance Bureau of Canada told Yahoo Finance in an email.

Those factors range from who you are to where you live and what kind of vehicle you own.

“Claims costs may be higher in certain areas than others and some areas may have more collisions, thefts, vandalism which would play a role,” he adds.

It also varies from province to province both in terms of what’s covered and who’s insuring.

“Auto insurance is sold by government owned and operated insurers in B.C., Saskatchewan and Manitoba,” he adds. “Quebec has a hybrid system with government (which is responsible for injuries) to private insurers who cover damage to vehicles.”

And then there’s the deductible – what you pay out of pocket in the event of an accident, which influences the price of your premium.

“Typically, the higher a deductible selected by the consumer the lower the premium will be,” adds Karageorgos. “A policy with a $1,000 collision deductible costs less than the same policy with a $500 deductible.”

But before you go shopping around for insurance providers for your sweet new ride, take a look at this week’s Money Minute where Yahoo Finance Canada’s Ashleigh Patterson breaks down why you pony up what you do.