Usage-based car insurance is a relatively new development in the insurance industry. There are a couple of different types of usage insurance. One monitors your driving habits, and the other is a pay-per-mile car insurance model. If you`re unsure which or if either is right for you, we`ll share some advice to help you decide.
We`ll also provide tips for maximizing your savings and finding discounts. In challenging economic times, finding ways to save money is more important than ever.
Telematics Usage-Based Insurance
This type of insurance program is very popular. Most of the country`s largest insurers offer some type of telematics program.
How Telematics Insurance Works
Insurance companies use data concerning your driving habits to set your rates. Some insurers send you a device to install in your car, others require you to download an app, and some let you choose. No matter how it`s collected, insurers are looking for risky behaviors such as the following:
- Excessive speed
- Fast acceleration
- Fast cornering
- Hard braking
- Miles driven
- Time of day
The way you drive provides insurance providers with an indication of your risk. Your habits may classify you as needing high-risk car insurance or being a low-risk driver.
Since car insurance companies base premiums on risk, the higher the chance you`ll file a claim, the higher your premiums. So, if you drive a fast car, you`ll need to be careful to keep your speed down if you want good rates.
The data that car insurance providers collect is similar between companies. The way they use that data varies slightly. For example, some calculate hard braking most seriously while others factor speed more heavily.
How to Save Using Telematics Insurance Options
How much a policyholder can save as a result of the collected data varies significantly between car insurance providers. However, most insurers offer the program at no risk to the policyholder. In other words, even the worst drivers won`t see a premium increase due to the data the telematics device or app collects.
You need to be careful because some insurers will increase your premiums to reflect poor driving habits. So, before signing up for a program, ensure you`re not risking higher premiums.
If there`s no risk and only a potential benefit, all you have to do is ask your insurance provider to enroll in its usage-based telematics program.
Some insurance companies provide a discount just for enrolling and then give you an additional discount if you demonstrate good driving skills. Other insurers base your eligibility for a discount solely on your driving habits.
Pay-Per-Mile Usage-Based Insurance
Miles-based policies entered the insurance world more recently than telematic-based insurance, quickly gaining popularity. Several major insurance providers have a miles-based program, and other insurers strictly offer that type of policy.
How Pay-Per-Mile Insurance Works
With a mileage-based policy, you`ll pay a flat monthly administrative rate and then a per-mile rate. So, if you drive 100 miles in a month, you`ll pay less for insurance coverage than if you drive 500 miles. Your base rate will be calculated based on risk factors like driving history, age, and the vehicle covered.
Some insurers track your mileage with a telemetric device, while others require policyholders to send a picture of the odometer each month.
Most of the time, these plans are best for individuals who drive a low number of miles. But you may find that they`re the lowest-cost option in some cases, even for average drivers.
Insurers who offer by-the-mile plans generally have policy allowances for road trips. As a result, customers don`t have to worry about paying for a car transport service to avoid paying exorbitantly high rates when they travel many miles in a short period.
How to Save Using Pay-Per-Mile Insurance
An ever-increasing number of insurers offer by-the-mile car insurance options. Consumers like paying for the driving they do, and insurers constantly strive to meet customer needs and fill niches.
This competition benefits the consumer by forcing insurance companies to provide better service and rates to secure your business.
Driving few miles is the most straightforward way to save on usage-based insurance, but you can also apply for discounts and practice safe driving habits to save money.
Usage-Based Insurance Helps Meet Consumer Needs
Car insurance customers want fair rates, especially when they know their driving habits are less risky than the average person’s.
Usage-based car insurance allows insurers to more accurately assess a policyholder`s risk, often resulting in the policyholder saving money.
Just remember to make sure using a usage-based insurance policy will save you money before committing to the switch.