How Does Your Licence Type Affect Your Auto Insurance Premium in Ontario?

Before a driver can hit the road in Ontario, they must go through the graduated licensing system (GLS) to get their driver’s licence. That means going through two levels — a written test (G1) and a practical exam (G2) — before getting a full G licence. The full G will let them drive on Canadian roads with fewer restrictions.

This system familiarizes young drivers, later-in-life drivers, and newcomers to Canada with different driving situations and environments and helps them progress gradually. But as one progresses through these levels, how do they stay protected and insured on the roads?

Let's say  your teenage son recently got his G1 licence (or learner’s permit), and now  has to wait at least eight months before applying for a G2. Does he have to get his own insurance policy? What if he gets a G2 and can drive on his own?

And how much will it all cost him?

Let’s look at the different types of licences and their impact on insurance premiums, how much you can expect to pay for auto insurance across different licence classes — and what you can do to reduce your insurance costs.

G1 licence and its impact on premiums

A G1 licence holder can only drive when accompanied by a fully licensed G driver and will be covered under the insurance policy of the G driver.

As such, you cannot purchase your own car insurance policy at the G1 stage.

However, you can get listed as a secondary driver under the insurance policy of another member of your household, like your parents or spouse. While this means that the primary driver’s insurance premium will go up to account for the increased risk, it allows the G2 driver to start building an insurance history. This insurance history will contribute towards lower insurance costs when you graduate through all the steps of the GLS process, obtain your G licence, and are ready to purchase your own insurance policy.

Just like any other driver, newly-licensed drivers are subject to penalties if they violate the rules of the road. Violating a traffic rule could mean anything from a traffic ticket, demerit points, or licence suspension (and having to restart the GLS process again), and increased insurance premiums for the primary policyholder.

Furthermore, these offences will be reflected in your driving history when you eventually purchase your own insurance policy, and lead to higher insurance rates further down the road.

G2 licence and its impact on premiums

At the G2 stage, you are allowed to purchase your own car and insurance policy. However, as young or new drivers are considered high-risk by insurance companies, your insurance rates will be significantly higher than someone who has a few years of driving experience under their belt.

Your other option is to stay listed as a secondary driver under someone else’s insurance policy.

In either case, the same rules apply: any tickets, penalties, or convictions will drive up insurance premiums for the primary policyholder (whether that’s you or the primary driver). All infractions will be carried over to your driving history.

G licence and its impact on premiums

Once you graduate to a G licence, you’ll see your premiums start to go down.

According to the InsuranceHotline.com auto insurance quoter, G2 licence holders were offered an average of $5,091 in annual premiums, whereas a G licence holders were offered premiums starting from $3,152 – nearly 40% decrease in insurance rates.

These premiums are only ballpark figures. The exact rates differ based on location, coverage needs, make and model of car, and age.  

Because most insurance companies also consider age to be a risk factor, younger drivers (21 and younger) who are just starting with a G licence can expect to pay upwards of $5,000 their first year. Newly licensed drivers in their early 30s can expect to pay at least $3,000 (again, depending on location, make and model, and other risk factors).

However, as you gain more experience and build a driving history, your insurance premiums will steadily decrease –  barring any convictions or claims.

Ways to reduce your insurance premium

Here are a few other ways to bring down your insurance rates:

Being listed as a secondary driver: As mentioned, getting yourself listed as a secondary driver on someone else’s policy can help build driving history and alleviate some of the high insurance costs later.

Bundling discounts: Speak with your insurance company about any discounts you may be eligible for when you combine multiple vehicles on the same policy. Or when you bundle home and auto insurance policies.

Driver’s education course discount: Many insurance providers offer a discount on insurance rates if you have undergone a driver's education course from a Ministry of Transport-approved driving school. Depending on the insurance provider, you can save up to 30% on your premium – roughly the equivalent to being insured for three years, claims-free.

Consider Usage-Based Insurance (UBI): UBI uses telematics to monitor your driving behaviour — like your driving speeds, turning, and braking — as well as how much you drive. It not only saves you money, but it also helps you form better driving habits to keep you safe on the roads.

Paying high auto insurance rates can dampen your newfound freedom, but building a good driving history and practicing safe driving habits will gradually lower your rates.