Drivers beware. A small, smart, and highly watchful plug-in device might be heading to a steering column near you. But who says Big Brother can’t use its all-seeing powers for good? If you allow your insurer to track certain everyday driving habits, you could be in line for serious car insurance savings.
As car insurance companies continue to implement and develop pay-as-you-drive (also known as usage-based) insurance pricing, here are five reasons why these programs are worth a closer look.
1) You’re a unique, safe-driving snowflake
Car insurance companies rely on a number of impersonal factors to calculate your rate, including your ZIP code and the make and model of your car. But not all drivers in a ZIP code are created equal, and some drivers who drive the same car are more prone to accidents than others.
You’re different. From your very first shift as hall monitor to the protectors that proudly line your pockets, you’ve always made safety a priority. If any of that rings remotely true, sign up for usage-based insurance.
After you sign up, your insurance company will mail you a small device to plug into your car’s on-board diagnostics port (located below your steering wheel). This little device, known as a telematics device, typically records these four factors:
- Miles driven
- Sudden, hard braking
- Time of day that you’re driving
If you’re an occasional driver who’s rarely out and about between 11 p.m. and 4 a.m. and you’re not prone to aggressive driving, this little device might help you save up to 30 percent on your car insurance.
2) Your car insurance rate will go down
Companies like Progressive (Snapshot® Program), Allstate (DriveWise® Program), and Esurance (DriveSense™ Program) offer immediate discounts of five to 10 percent just for enrolling in the program. And once your insurer reviews your driving habits, you could save an additional 30 percent on your premium. Say you currently pay $1,000 per policy term and you decide to give usage-based insurance a spin.
- Current policy term: $1,000
- Enrollment discount (10 percent): -$100
- Full 30 percent discount on subsequent term: -$270
- Future premium: $630
That’s a theoretical savings of $370 per term (cut to Big Insurance Brother nodding approvingly).
3) Your car insurance rate won’t go up
Another major incentive to usage-based insurance: Your rates won’t go up if you prove to be a crummy driver. Even if the data collected reveals that you drive yourself to sleep every night between 11 p.m. and 4 a.m. while braking hard and accelerating at random, your car insurance rate won’t increase because of the data alone.
But we do recommend alternative sleep therapy.
4) You just bought a bike and joined a carpool
One of the most reliable predictors of car accidents is the number of miles driven. If you drive 50,000 miles per year, you’re more likely to crash than a parallel version of yourself who drives just 3,000 miles per year. Insurers are onto this, which explains why they ask for your annual mileage whenever you get a quote.
If you recently took up cycling or started a carpool to work, or you decided to give the bus or subway a chance, you’ve removed some risk from your driving life. The on-board device reports this good news to your insurer, which can help you secure the lower rate you and your planet-friendly habits deserve.
5) It’s a savings spy, not an evil spy
Technology and privacy don’t always see eye to eye. But insurance companies that are offering usage-based insurance programs are quick to point out what their devices do not report: your location and whether or not you were speeding. Progressive notes that drivers’ information won’t be shared unless it’s for research or required by law. Specific trip data won’t be used in the event of a claim unless you grant permission to do so.
At its worst, it’s a nagging spy: Progressive’s device might beep when you brake suddenly, for example, like a backseat driver gone digital.
Here’s another perk: All data collected is available online, so you can log into your personalized driving page and review overall driving patterns and trip-by-trip details. And if you don’t like what you see or you don’t like your insurer seeing what you see, you can always opt out.
How to find a usage-based car insurance program
More and more states and providers are offering pay-as-you-drive auto insurance programs to drivers. There are two primary ways to get started:
1. Call your insurance company
See if they offer a program in your state and whether you’re eligible to enroll. Progressive’s program is available in more than 40 states, while Esurance’s program is in just five.
If your insurer does offer usage-based insurance, ask about your potential savings and find out whether there’s any obligation to continue the program if it’s not to your liking.
2. Switch your car insurance
The next time you shop for a new car insurance policy, ask whether a usage-based program is available. They’re typically free to try and free to cancel (if you’ve had enough of that beeping sound, for example).
We’d love to hear what you think of your usage-based car insurance program. Has it helped you save and drive more safely?