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Investing With a Purpose: Understanding Socially Responsible Investing

Socially Responsible Investing (SRI) has boomed in recent years as investors have discovered they can put their money behind investments that contribute to important social and environmental issues. According to SIMFUND Canada, Canadians invested more than $3.2 billion in Canadian-based environmental, social and governance (ESG) funds in 2020, while total net assets in these funds exceeded $22 billion – a 37% increase over the year before.

At the same time, studies have found that companies in SRI funds have better environmental, social and governance practices that may make them more sustainable long-term and therefore healthier and less volatile financially. A company’s ethical practices have also been shown to reduce exposure to scandals, disasters and lawsuits.

All of these factors can positively affect share prices and impact returns for investors.

Understanding SRI

When it comes to responsible investing, there are a number of terms and acronyms investors may come across – such as Impact Investing, ESG and SRI, which are sometimes used interchangeably. Understanding the difference between them can help new investors navigate this landscape.

For example, a company may be considered a responsible investment if it has a diverse board of directors – a company that manufactures weapons, on the other hand, would not be. ESG investing, meanwhile, considers how Environmental, Social and Governance factors affect the performance of a company, both positively and negatively (and therefore an investor’s returns).

Impact investing is a way to invest your money to create measurable positive outcomes. While SRI and impact investing both aim to bring about social change while delivering a financial return, impact investing requires that the change be more timely and impactful. Impact investing often involves private funds from institutional investors, while SRI investing involves investments available to all retail investors.

There’s more than one way to be a socially responsible investor

SRI investments aren’t simply selected by typical performance metrics such as earnings, growth and profit margins, but also by whether a company’s business practices align to the investor’s values – or not. To determine which companies to select for a fund, a fund manager has two methods to use: positive and negative screening.

Positive screening is a process that identifies companies making positive social or environmental contributions. Those with better ESG practices compared to their competitors are more likely to be included in the fund. While in many cases positive screening techniques highlight organizations that are actively furthering environmentally sustainable or positive social practices, positive screening is not limited to investing in companies within environmentally or socially focused industries. Companies with a stronger commitment to ESG practices in any industry may be considered as socially responsible investments.

Negative screening is one of the most basic methods of separating socially responsible investments from those that are likely to have a negative effect on society. It is one of the most widely used processes of weeding out companies that do not align with an investor’s values, such as those in industries like alcohol, tobacco or gambling, organizations associated with human rights violations or environmental damage or companies that do not meet diversity standards.

Both methods can lead to socially responsible investing. While negative screening prevents investors from supporting practices they find undesirable, positive screening purposefully supports those companies that are actively doing good and supporting investor values.

Investing in line with your values can pay off

For Canadians looking to invest in funds that can make a positive difference in the world, the future is bright. New funds continue to be introduced as interest grows in SRI investing. Companies with strong ethical and environmental practices may perform better in the long-term because they’re more sustainable. With a win-win situation like this, it’s no wonder Canadians are increasingly adopting socially responsible investment practices.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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Socially Responsible Investing (SRI) has boomed in recent years as investors have discovered they can put their money behind investments that contribute to important social and environmental issues. According to SIMFUND Canada, Canadians invested more than $3.2 billion in Canadian-based environmental, social and governance (ESG) funds in 2020, while total net assets in these funds exceeded $22 billion – a 37% increase over the year before.

At the same time, studies have found that companies in SRI funds have better environmental, social and governance practices that may make them more sustainable long-term and therefore healthier and less volatile financially. A company’s ethical practices have also been shown to reduce exposure to scandals, disasters and lawsuits.

All of these factors can positively affect share prices and impact returns for investors.

Understanding SRI

When it comes to responsible investing, there are a number of terms and acronyms investors may come across – such as Impact Investing, ESG and SRI, which are sometimes used interchangeably. Understanding the difference between them can help new investors navigate this landscape.

For example, a company may be considered a responsible investment if it has a diverse board of directors – a company that manufactures weapons, on the other hand, would not be. ESG investing, meanwhile, considers how Environmental, Social and Governance factors affect the performance of a company, both positively and negatively (and therefore an investor’s returns).

Impact investing is a way to invest your money to create measurable positive outcomes. While SRI and impact investing both aim to bring about social change while delivering a financial return, impact investing requires that the change be more timely and impactful. Impact investing often involves private funds from institutional investors, while SRI investing involves investments available to all retail investors.

There’s more than one way to be a socially responsible investor

SRI investments aren’t simply selected by typical performance metrics such as earnings, growth and profit margins, but also by whether a company’s business practices align to the investor’s values – or not. To determine which companies to select for a fund, a fund manager has two methods to use: positive and negative screening.

Positive screening is a process that identifies companies making positive social or environmental contributions. Those with better ESG practices compared to their competitors are more likely to be included in the fund. While in many cases positive screening techniques highlight organizations that are actively furthering environmentally sustainable or positive social practices, positive screening is not limited to investing in companies within environmentally or socially focused industries. Companies with a stronger commitment to ESG practices in any industry may be considered as socially responsible investments.

Negative screening is one of the most basic methods of separating socially responsible investments from those that are likely to have a negative effect on society. It is one of the most widely used processes of weeding out companies that do not align with an investor’s values, such as those in industries like alcohol, tobacco or gambling, organizations associated with human rights violations or environmental damage or companies that do not meet diversity standards.

Both methods can lead to socially responsible investing. While negative screening prevents investors from supporting practices they find undesirable, positive screening purposefully supports those companies that are actively doing good and supporting investor values.

Investing in line with your values can pay off

For Canadians looking to invest in funds that can make a positive difference in the world, the future is bright. New funds continue to be introduced as interest grows in SRI investing. Companies with strong ethical and environmental practices may perform better in the long-term because they’re more sustainable. With a win-win situation like this, it’s no wonder Canadians are increasingly adopting socially responsible investment practices.

Interested in investing in an SRI fund? Speak with your RBC Insurance Advisor and learn about the new funds we’re introducing to support your goals and values.

Call us at 1-888-512-3059.

 

RBC Insurance

We make it easy to find expert advice, money-saving tips, and a range of insurance options for every moment of life.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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But when thinking about the type of funds to choose, keep in mind that as you approach retirement, your financial needs, goals, and how you invest will start to change.

While retirement may still be in the distant future, eventually you’ll need to protect the money you’ve worked hard to save, while still making it grow in order to carry you through retirement. In fact, according to an RBC Insurance survey, 87 per cent of Canadians aged 55 and over agree that they’d like an investment product that guarantees the money they invest, but that also offers opportunities for growth. Yet 60 per cent are not aware that this option is available with segregated (seg) funds.1

Growth and Guarantees for Your Investments

Segregated funds are an investment solution only available through insurance companies. They help to grow and protect your hard earned savings with the added security of principal guarantees. Think of it as a combination of a mutual fund and an insurance policy. In other words, money is invested in professionally managed and diversified assets with the growth potential similar to mutual funds. But segregated funds have additional insurance components that protect the original amount invested.

Segregated funds offer several other unique benefits that other investment products don’t have, including:

  • Protection through guarantees.2 A maturity guarantee helps to protect your initial investment (at contract maturity), while a death benefit guarantee ensures that your named beneficiaries will receive 75% or 100% of the amount that was invested (depending on the guarantee option chosen by you) on your death.
  • Reduce estate-planning costs. After a person dies, there is a legal approval process required to validate their Will. This process is called probate, and can be a lengthy administrative hassle that incurs fees. As an insurance product, segregated funds death benefits paid to specific beneficiaries are not subject to the probate process, meaning that funds go directly to the beneficiary, without any estate or probate fees3.
  • Potential protection from creditors. Segregated funds are considered an insurance contract so they may be exempt from seizure by creditors if the named beneficiaries are in the protected class under provincial law. This may be an important benefit for professionals, entrepreneurs and business owners who might be involved in an unexpected lawsuit or bankruptcy.
  • Increase your protected amount. If your investment has earned money, you may have the option to “reset” the guaranteed value of your investment, which locks in the gains you’ve earned.

These guarantees and benefits, combined with the growth potential, are what make segregated funds so appealing to those who are planning or approaching retirement.

Interested in Learning More About Segregated Funds?

Segregated funds can only be purchased through a life insurance advisor. Have an RBC Insurance advisor contact you to learn more.

1) https://www.rbc.com/newsroom/news/article.html?article=123680
2) Guarantees are proportionally reduced by withdrawals.
3) Probate fees and requirements vary by province.

 

RBC Retirement Investment Solutions

Whether you’re building up your nest egg or ready to turn your hard-earned savings into retirement income, our solutions can help you make the most of your money. Have an RBC Insurance Advisor call you to learn more.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.

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Surprisingly, there’s an option that you may not have heard about: segregated funds. Discover the differences between segregated funds and mutual funds and why the former might make a great addition to your investment portfolio.

Key takeaways

  • Segregated funds and mutual funds both involve pooling investments with other investors to create more options and reduce risk, but they also have some key differences.
  • Segregated funds are an insurance product with unique benefits, such as guarantees on your original investment, estate-planning perks, and potential protection against creditors.
  • Before choosing your investment route, speak with a certified professional about considerations that include your retirement timeline, tax planning, and risk tolerance.

What are segregated funds?

Segregated funds, also known as guaranteed investment funds (GIFs), are similar to mutual funds in that they involve the pooling of money by multiple investors. In both cases, a professional fund manager will take that pooled money and invest it in various stocks, bonds, and/or other securities (known as a “portfolio”), based on the fund’s investment mandate. This strategy allows investors to put their eggs in a variety of different baskets, which may limit the risk of market fluctuations.

The major way that segregated funds are unique is that they include insurance guarantees, which means you may be able to protect part or all of the money you originally invested. At their most basic, segregated funds are mutual funds combined with an insurance policy.

How do segregated funds and mutual funds differ?

Mutual funds and segregated funds are similar in many ways: they have professional portfolio managers, they allow you to diversify risk, and they offer potential creditor protection on registered accounts.

But, there are some unique benefits of segregated funds.

Principal protection

When investing in mutual funds, there’s always the risk that the market could be experiencing a downturn when you’re hoping to access your savings for retirement. With segregated funds, the amount you invest (known as your “principal”) is protected by two guarantees.

  • Maturity guarantee: At the maturity date (the date the term is up for your investment—typically, 10 years or longer), you’re guaranteed to receive either the current market value of your investment or a minimum guaranteed amount, whichever is greater (the difference paid is often called a “top up”). The minimum guaranteed amount is typically 75 to 100 per cent of your principal, minus management fees and other costs.
  • Death benefit guarantee: Should you pass away, the person or people you name as your beneficiary or beneficiaries will receive either the current market value or a minimum guaranteed amount (75 to 100 per cent), whichever is greater.
Estate-planning benefits

Normally, the settlement of an estate takes time and involves a public probate process (where the courts formally recognize and review an individual’s will) with fees and taxes. With a segregated fund, the death benefit may be paid out faster to your named beneficiary or beneficiaries, bypassing a lengthy, public, and expensive estate settlement and probate.

If you have a blended family, a segregated fund may reduce potential conflict by allowing you to set aside assets from your overall estate to go directly, and privately, to a specific beneficiary.

The quicker process with the segregated fund could also help your beneficiary or beneficiaries when its proceeds are intended to provide ongoing financial support.

Resets

With segregated funds, you may be able to “reset” the guaranteed amount of your principal investment. Say you invested $10,000 in a segregated fund, and the market rises over the next year, so your investment is now worth $11,000. With a reset, you can lock in your principal guarantee at $11,000 to protect your gains. Just note that your maturity date will likely reset as well.

Potential creditor protection

Segregated funds are an insurance product. That means, unlike mutual funds, segregated funds can potentially protect both registered and non-registered assets from creditors. If you’re a business owner or are self-employed, this perk might be particularly attractive.

Liquidity

Both segregated funds and mutual funds can be cashed in at any time at their current market value. However, you’d need to hold the segregated funds until their maturity date in order to access the maturity guarantee amount.

Fees

Sometimes, the fees for segregated funds may be higher than for mutual funds, due to their additional benefits.

Factors to consider when choosing between segregated funds and mutual funds

When deciding between various mutual fund and segregated fund portfolios (or choosing a mix), you’ll want to consider several factors.

  • Investment goals and timelines: Segregated funds are a long-term investment and will match best with your long-term goals, such as planning for retirement or planning a financial legacy for your family.
  • Risk tolerance: Mutual funds and segregated funds have investment options for all risk tolerances, but segregated funds are generally considered safer, because of the principal guarantees.
  • Liquidity needs: Do you need to be able to liquidate your assets at a moment’s notice? Both segregated funds and mutual funds allow you to access your invested capital at any time; although, cashing in early means you lose your guarantee.
  • Estate-planning considerations: Segregated funds can be a smart idea if you’re planning a financial legacy for your beneficiary or beneficiaries or you want privacy for your estate plans.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.

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But when thinking about the type of funds to choose, keep in mind that as you approach retirement, your financial needs, goals, and how you invest will start to change.

While retirement may still be in the distant future, eventually you’ll need to protect the money you’ve worked hard to save, while still making it grow in order to carry you through retirement. In fact, according to an RBC Insurance survey, 87 per cent of Canadians aged 55 and over agree that they’d like an investment product that guarantees the money they invest, but that also offers opportunities for growth. Yet 60 per cent are not aware that this option is available with segregated (seg) funds.1

Growth and Guarantees for Your Investments

Segregated funds are an investment solution only available through insurance companies. They help to grow and protect your hard earned savings with the added security of principal guarantees. Think of it as a combination of a mutual fund and an insurance policy. In other words, money is invested in professionally managed and diversified assets with the growth potential similar to mutual funds. But segregated funds have additional insurance components that protect the original amount invested.

Segregated funds offer several other unique benefits that other investment products don’t have, including:

  • Protection through guarantees.2 A maturity guarantee helps to protect your initial investment (at contract maturity), while a death benefit guarantee ensures that your named beneficiaries will receive 75% or 100% of the amount that was invested (depending on the guarantee option chosen by you) on your death.
  • Reduce estate-planning costs. After a person dies, there is a legal approval process required to validate their Will. This process is called probate, and can be a lengthy administrative hassle that incurs fees. As an insurance product, segregated funds death benefits paid to specific beneficiaries are not subject to the probate process, meaning that funds go directly to the beneficiary, without any estate or probate fees3.
  • Potential protection from creditors. Segregated funds are considered an insurance contract so they may be exempt from seizure by creditors if the named beneficiaries are in the protected class under provincial law. This may be an important benefit for professionals, entrepreneurs and business owners who might be involved in an unexpected lawsuit or bankruptcy.
  • Increase your protected amount. If your investment has earned money, you may have the option to “reset” the guaranteed value of your investment, which locks in the gains you’ve earned.

These guarantees and benefits, combined with the growth potential, are what make segregated funds so appealing to those who are planning or approaching retirement.

1) https://www.rbc.com/newsroom/news/article.html?article=123680
2) Guarantees are proportionally reduced by withdrawals.
3) Probate fees and requirements vary by province.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.

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Nearly seven in 10 Canadians report that they have current debt – and four in 10 say they don’t know how they would pay their bills if they became critically ill or disabled and couldn’t work.

One option to help keep income flowing if an unexpected sickness or injury happens is through an insurance policy. While critical illness and disability insurance are different products, they serve a similar purpose of protecting your finances should you become unable to work and earn an income.

The lowdown on disability insurance

Disability insurance pays a monthly income, this is called the benefit, that replaces a portion of your regular pay cheque if you suddenly find yourself in a situation where you can’t work because you’re sick or injured. This includes mental illnesses such as anxiety, depression and post-traumatic stress disorder. Here are a few examples of an illness or injury, that might qualify for benefits under a disability insurance policy:

  • if you develop a mental illness, such as generalized anxiety disorder;
  • if you are injured, such as if you break your leg; or
  • if you develop a physical illness, such as multiple sclerosis.

Your specific disability insurance policy will explain the details of your coverage – such as:

  • how long you would need to be disabled before monthly payments begin,
  • the maximum amount of money you could receive each month, and
  • how long the payments might last if you continue to be disabled.

For example, your policy might say that payments would cover 60 percent of your gross salary to a maximum of $4,500 per month; it would start 60 days after you develop a condition that is covered under your policy (that 60 days is referred to as the “waiting period”), and payments will last until you’re age 65, so long as you continue to be disabled and unable to work.

Disability insurance plans will either cover you for your “own occupation” or “any occupation.” If you have “own occupation” coverage, you will continue to receive your monthly benefit if you are unable to return to your regular, pre-disability job. In contrast, if you have “any occupation” coverage and you are unable to return to your regular job but could take a less-demanding job, your benefit payments could stop.

Some Canadians may have disability insurance through work. A workplace policy is more likely to provide “any occupation” coverage, so be sure to ask your HR department what kind of coverage you have, if any.

Canadians can purchase an individual disability policy from an insurance broker or insurance company, and can select coverage that is catered to their own needs, including purchasing a policy with “own occupation” coverage.

The number of Canadians who have disability insurance through work is declining – fewer than half of Canadian employees say they have coverage through work, and out of those employees with no work coverage, more than eight in 10 say they have not purchased their own personal policy.

If you have workplace coverage, and your employer pays the cost of the insurance on your behalf, the income you’d get from the policy is taxable. If you pay the cost of your disability insurance from work yourself, the monthly benefit is not taxable.

If you have a personally owned policy, the monthly income you receive if you become ill or disabled is not taxable.

The lowdown on critical illness insurance

A critical illness policy will pay out a lump sum if you are diagnosed with one of the illnesses covered by the policy – such as cancer, Alzheimer’s disease, a heart attack or a stroke.

Unlike a disability insurance policy, critical illness provides coverage for certain illness but no injuries.

The lump sum benefit from a critical illness policy is not determined by your income prior to diagnosis, and unlike disability insurance, you don’t have to have a job to qualify.

Another difference you may have noticed between disability insurance and critical illness is that you receive one lump sum payment with critical illness, instead of the monthly payments you would receive with disability insurance.

The lump sum payment is tax-free. You receive the payment after a relatively short wait time – called the survival period, this is usually 30 days after your diagnosis – and your claim is approved by the insurance company.

Receiving a critical illness benefit doesn’t affect any disability payments you may also be receiving or are eligible for, and there are no restrictions on how you spend the money. For example, you might decide to use the lump sum payment to help with housekeeping chores you are no longer able to carry out personally, to pay for the cost of child care, or to retrofit your home to better suit your needs.

If you’re interested in critical illness insurance, you will need to carefully review and compare policies and ask lots of questions – as the coverage can vary significantly. For example, some policies may only provide a payout if you are diagnosed with one of five conditions, while others might cover as many as 30 different conditions.

While many Canadians are aware of the importance of life insurance, critical illness and disability insurance can be an equally important part of your financial plan. Critical illness and disability insurance are sometimes referred to as “living benefits” because unlike life insurance, you could receive payments from this policy while you are still alive; so it offers protection to you directly, as opposed to your beneficiary.

Have you put together a plan for how you would pay your bills or manage expenses if you suddenly become ill or injured and can’t work? Consider taking some time to calculate how much you might need should the unexpected happen, to make sure that your income is protected, and to learn what options are out there to help.

 

RBC Disability Insurance

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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Personalizing your coverage and finding ways to lower your costs by working with a licensed insurance advisor can help you stay protected and keep more money in your wallet.

Short-term hacks

Did you know that you might be eligible for savings because of things you’re already doing?

Car insurance companies offer discounts to drivers who do things that help reduce their risk of getting into an accident or making other types of claims. For example, installing snow tires on your car in the winter, only driving your vehicle for low-mileage pleasure use, or having an anti-theft device may all save you money.

New Driver or Student in the House

Newly licensed drivers may be eligible for savings when they graduate from a beginner’s license class and move to another license level. Also let your insurance company know if children listed as drivers on your policy are attending school away from home. There might be some savings on your insurance premiums because they will have limited access to your car.

Are you a new driver? Check out these tips on smarter choices you can make for car insurance.

Bundling your car insurance

You can also save money on car insurance by bundling your car insurance with your home or renter’s insurance or by having multiple cars in your house insured with the same company.

Employers and associations

You might be eligible for insurance discounts as a member of a union, a professional association or other organization.

Customize your coverage

Another way to reduce the cost of car insurance is to personalize your coverage. There is mandatory coverage required such as third-party liability and accident benefits, which provide coverage if you get into an accident that causes personal or property damage. But there are other types of coverages that may be optional like collision and comprehensive coverage and emergency roadside assistance.

Make sure your plan fits your needs today. While you shouldn’t give up the coverage you need, one size does not fit all — and your needs may change over time. Is your car several years old? Its value might have gone down significantly, which could affect your need for something like collision and comprehensive coverage on your vehicle. You might also consider increasing your deductible which is the amount you pay when you make a claim. If you get insurance with a $1,000 deductible, you may pay less premiums than if you get insurance with a $500 deductible.

Overall, customizing your coverage can help you:

  • Save money by only paying for what you need
  • Protect you and your family
  • Adjust your coverage as your life changes

Longer-term strategies

Now that you’ve found some quick saving opportunities, you’re likely wondering if there are longer-term changes you can make that might help you save money on car insurance in the future. The good news is that there are.

Tickets and Accidents

Your driving record is a key factor in determining how much you pay for insurance. It includes your class of license, number of years licensed, traffic convictions, and claims.

The most important thing is to drive safely and don’t get driving violations like speeding tickets, failing to yield or distracted driving to name a few. Thankfully parking tickets don’t affect your insurance rates, but avoiding them still helps to keep money in your wallet.

So what about accidents? Unfortunately mistakes happen—it is, after all, called an “accident” for a reason. Getting accident forgiveness coverage in advance is another long-term strategy to protect you against future premium increases after your first at-fault accident. But remember: accident forgiveness coverage helps to protect your premiums from increasing only after your first at-fault accident. Any accidents you have after that will likely affect your insurance premiums.

Credit Score

Another way you could decrease your premium in certain provinces is to have a good credit rating (excluding Newfoundland, Labrador and Ontario, where credit scores are not allowed to be used for auto insurance premium calculations). The better your credit score is, the lower your insurance premiums may be should you choose to disclose it.

Vehicle Type

Get insurance quotes for the vehicles you are thinking about leasing or buying before you close the deal. The year, make and model of a vehicle may affect the cost of your insurance. Some cars have a higher likelihood of being stolen or being in more accidents, so insurance companies charge more to insure those vehicles. By checking on rates in advance, you might save a significant amount in insurance premiums over the life of your vehicle.

Be sure to check your policy every year to ensure that all the information is accurate and up to date. Ask questions in case there are discounts your insurance company offers that you qualify for. An RBC Insurance advisor can help you do that. Call 1-877-749-7224 or get a quote online today.

If you’re interested in learning more about car insurance, check out How Car Insurance Premiums are Calculated next.

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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