Checking Into Auto Insurance with TD Meloche Monnex for a New Teenaged Driver

Several of our nieces, nephews and other relatives are approaching that magic age—16—at which they can begin learning to drive legally in Ontario. Hearing the moans and groans of neighbouring parents about car insurance for young drivers, I decided to call TD Meloche Monnex and ask what rates they would charge for a new teenaged driver and when.

What’s the First Level of Driver’s Licence in Ontario?

Ontario uses a graduated licensing program. A new driver learning for the first time usually starts by writing a test on signs and road rules. If they pass with a high enough score they are granted a G1 license. With a G1, a student driver can learn to drive with a licensed, insured driver sitting beside them in the front passenger seat. There are a whole string of other conditions about what times of day they can drive, what roads they can drive on, what amount of alcohol they can have in their blood stream while driving (0!) and so on. Check the MTO website for the current rules and restrictions. They change.

Every driver should, of course, be insured. So I called Monnex to find out what their insurance rules are for new drivers who are the children of insured drivers.

What Does TD Meloche Monnex Charge for the Teenage Child with a G1 of an Insured Driver?

We have our car insurance with TD Meloche Monnex. They’ve been reasonable to deal with and they have a group discount rate for Professional Engineers in Ontario. (PEO members)

So I posed them the theoretical question of: If my child is 16 and passes the written test to get their G1, what do I have to do to insure my child?

I was surprised to learn I just have to phone Monnex and add the child’s name to our policy. There is no annual fee for us to have a child student driver added to our policy! No wonder some parents are not in a rush for their child to take their G2 road test.

What’s the Second Level of Driver’s Licence in Ontario?

After learning to drive, and after practicing for one year, a student driver can take the road test to upgrade their license to the second level. If they pass the test they will be granted a G2.

The student can take the G2 test a bit earlier if they take a Driver’s Education course approved by the Ministry of Transportation of Ontario.

I found it interesting that the government is actually listing driver’s education companies to avoid. They provide a list of “Unlicensed driving schools to avoid.”

What Does TD Meloche Monnex Charge for the Teenage Child with a G2 of an Insured Driver ?

We have our insurance with Monnex. We would want to add our child to our policy when they earn their G2.

Monnex wasn’t keen to quote me a rate yet, since this is years in advance. They did say the rate will depend on many factors. It could be around $1200/year for a driver in the GTA.

I mentioned that the driver would be one of three people in a household with only two licensed vehicles. In that case, the agent said the insurance will be more likely to be in the range of $400-800 per year.

Does TD Meloche Monnex Offer an Insurance Discount for G2 Drivers With Driver’s Education and for How Long?

I asked if our child took driver’s ed from, say, Young Drivers of Canada, would it affect the premium.

The agent said generally having drivers’ education from an approved school would reduce the insurance cost by about 5% a year.

The discount would apply for three years after the driver gets their G2 license.

What’s the Third Level of Driver’s Licence in Ontario?

Most drivers will take an “exit test” a year after getting their G2 license in Ontario. This is another more complicated road test. If they pass it, they are granted a full G class driver’s licence. That’s the usual licence us “old folks” have had for years.

What Happens to Our Child’s Car Insurance Rate Once They Get Their G1 License?

That was so far out in the future that the agent wouldn’t quote me a rate. I’ll have to write about that if and when any of our children grow up enough to get their licence so it will be a few years! If your own child has already reached this stage, please leave a comment with any info about insurance costs. I’m sure other readers will appreciate it!

For now, we have nothing to worry about. Our children aren’t old enough to be a menace on the highways, yet. When they are, however, it looks like we’ll have to add a few more thousand to our annual budget.

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Do you have a young driver in your household? Has car insurance been reasonable or a killer? Please share your experiences with a comment.

Retirement Planning: What Rate of Inflation Should I Use?

Michael James on Money started it. Then BigCajunMan took over— trying to estimate how much income he could draw out of a retirement nest egg based on various factors including inflation and the rate that the investments grow before withdrawal. As he says, it is very hard to pick what percentage to use for inflation. CPP is also “indexed” to inflation at a rate picked by the government so your monthly check can go up. I’ve generally found our bills go up more in a year than that government rate, though. So for my personal retirement planning I wondered what rate of inflation I should use.

Being an Information Pack Rat Has Some Uses

I’ve always been an information pack rat. In fact, I could tell you how much income tax I paid for working for the public library one year while in high school. (I can guess how few people are actually going to ask that.) For this exercise, it’s handy though. I know how much we’ve paid each year, actually each month, for most of our billable household costs.

From that information, I can calculate an approximate rate of inflation.

Estimating Inflation When Costs Don’t Always Increase

It gets a bit tricky because costs don’t actually always increase. Our Natural Gas costs, for example, are significantly lower now than in the past. (Thanks to shale gas frac’ing: We now have cheap nat gas but one day when we can’t get any clean drinking water at any price we may not be so thankful.)

During the interval 2001-2012:

  • Highest Natural Gas year: 2006: $1727
  • Lowest Natural Gas year to date: 2012: $924

What should I use to estimate the rate of inflation if it’s actually deflation?

Well, if I estimate inflation too highly I will have extra money to spend on the occasional rutabaga; if I estimate it too lowly I will have to forfeit my semi-annual clementine: I vote over estimate. So I will cheat and pretend the price of natural gas rose from $924 to $1727.

Car insurance can also dip for some people as their car ages. Not for us of course! We live in a “car accident capital of Canada” so we pay almost identical insurance on our brand new Camry as we do on our 15-year-old Corolla. Go figure. We’re insured basically against what we can do to someone else. (Good thing we usually walk to work.)

Our Personal Planning Inflation Estimates Based on Costs from 2001 to 2012

Not all the numbers are in yet for 2013 so these estimates are based on payments from 2001 to 2012.

Our Property Tax Inflation

Our mayor has made a valiant effort to keep these increases as low as possible. Even so our property taxes have increased: 2.9% per year

Our Home and Car Insurance Inflation

I’m lumping these two together since we buy both from the same company and there is a discount involved.

Our insurance costs have increased: 0.46% per year

(Yes, that was surprising! Please remember though that the replacement value for one car in that time has dropped 12 years worth to basically 0.)

Our Natural Gas Inflation

NOTE: This is not the increase in cost per BTU. This is the increase in our total bill. It includes tax increases and if we had any increases in consumption per year.

This is the one I’m lying about and flipping from deflation to inflation. This is my “mad rutabaga” money.

Our natural gas rates have (decreased) increased: 5.8% per year

Our Electricity Inflation

We use more electricity now than we used to. I blame the kids.

Again, this is not the increase in cost per megawatt. This is the increase in our total bill including all the lovely surcharges added by the government and the time of use rates.

Our electricity costs have increased: 1.7% per year

Our Water Inflation

Strictly speaking, we pay for both water, waste water and water infrastructure based on how many m3 of water we use per year.

Our water costs have increased: 4.1% per year

Our Cable TV Inflation

Well, this is a bit misleading. We got rid of our cable this year when they tried to raise my rates again. However, in the interests of historical accuracy, and shock, here goes.

Our cable TV costs had increased: 3.5% per year

Our Telephone (Landline) Inflation

We aren’t really cell phone users having simple pay-as-you-go emergency phones only. So luckily, there’s only one number to report here.

This cost includes our long distance charges. We barely make any long distance calls and when we do we use one of those “dial 10-10-xxx” things so they only cost 25 cents.

Our telephone costs have increased: 0.8% per year

OK, I admit I was surprised by how low that is, too.

Our Internet Inflation

We were “early adaptors” to using high speed internet so we’ve always paid too much.

Our inflation rate is probably lower than people’s because when you start at the top, there’s less distance to climb.

Our internet costs have increased: 2% per year

Our Gasoline Inflation

This one is a bit tough to calculate too. I’m not interested in the percent increase in the cost per litre, although I could tell you that if you forced me to. I’m interested in the percent increase in total annual spending. The problem is that we only go on a major cross-Canada road trip every second year. And after someone totaled my car last year, we went down to one car for 6 months. So I think I’ll just have to skip this one.

It’s not really a mandatory retirement expense anyway, as we’ll probably have to walk everywhere when we retire because we’ll be too broke to afford a car. Unless there’s some way we could power one off those extra rutabagas….Hmmmmmm.

An Overall Personal Rate of Inflation Based on 2001-2012

So what do I get if I try the same overall calculation but based on the sum of our costs for

  • natural gas
  • electricity
  • water
  • property taxes
  • cable
  • telephone
  • internet
  • house and car insurance

Our overall personal rate of inflation for 2001-2012 was: 2.3% a year

OK, I admit it again. I’m surprised. I was expecting more like 4%.

If you want to know how that compares to our single-year rate of inflation for 2011-2012, please see: Budgeting for Retirement Requires a Good Estimate of My Personal Rate of Inflation for 2012.

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Have you ever tried to calculate your personal rate of inflation? (No, I don’t mean pre- and post-turkey dinner!) Please share your horrific results with a comment.