Technology is everywhere, and it’s even entered into the world of auto insurance. You might have seen a few commercials from car insurance companies that showcase some new device that can supposedly help you save you money on car insurance. What exactly are those things? It’s called usage-based insurance (UBI) and it has to do with telematics (which is basically data about how you drive.) We’ll explain usage-based car insurance, and we’ll go over how it could help you save money on your car insurance.
What is usage-based car insurance and telematics?
Usage-based car insurance is offered by different carriers in certain states. It’s also called PAYD (Pay-as-You-Drive) and PHYD (Pay-How-You-Drive.) Basically, it means that your rates are based on how you drive or how much you drive.
How is this possible?
It uses a telematics device, which is connected to the vehicle (sometimes it’s plugged into the vehicle diagnostic port.) The telematics device tracks your driving habits – when you drive, where you drive, how much you drive, and incidents such as harsh braking or sudden acceleration. The data that’s collected helps your insurance company get an idea about your current driving practices.
Normal car insurance companies use details such as the year/make/model of your car, your driving record, what you’re using the vehicle for, and so on to set your rates. With usage-based insurance, the insurance company is seeing how you drive now, where you’re driving now, and how much you’re driving now. Your rates depend a lot more on your current driving patterns and habits.
This brings us to our next point: how usage-based insurance can help you save on your car insurance.
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How can usage-based insurance help me save money on my car insurance?
So, there are several ways that a usage-based car insurance program could help you save money car insurance:
First, some programs base your rates on how much you drive. If you don’t drive very much, this could result in some pretty significant savings.
Second, some programs reward safe driving. That creates a fairly hefty incentive to become a super safe driver, right? It also means that the insurance company is seeing your safe driving habits, so they know that you’re not driving recklessly even if you have a ticket or an accident on your record from a couple years ago. Safe drivers often get lower rates because they’re seen as being less likely to get into an accident and then file a claim.
Third, if you’re a “high-risk” driver who’s facing high rates, a telematics device and usage-based car insurance policy could help you get lower rates.
Now. Keep in mind that usage-based insurance isn’t for everyone. There’s no guarantee that a new, fancy little device in your car will help you save money on your rates. But it might be worth doing some research or finding out if your insurance company already has a telematics-based program. (And you can get a free quote for car insurance by reaching out to our team.)
Where does the telematics data go?
Some people may be concerned about the data being collected by your telematics device. If you have any questions about what data is being collected, where it’s going, and how it’s being used, you can always ask questions of your carrier and ask for the terms and details of the program. They should be able to explain where the data is going, what’s being collected, how it’s used, and how it’s protected.
What does the future look like for usage-based insurance?
The technology that allows for telematics tracking opens the door for other vehicle tracking features. Not only does telematics have a huge potential for growth, there are other uses for the technology that could come to pass in the future. Vehicle wellness reports, vehicle theft tracking, and automated emergency response features could also become a part of UBI.
Make sure to do your research.
Before making the decision to pursue UBI or a telematics system, be sure to do your research. Find out about the carrier itself – are they financially stable? Do they have a good record of handling claims? Are their customers satisfied with the service they receive? Also, take some time to read the customer experiences of real policyholders who have used the device.
So, hopefully, that gives you an idea of what usage-based car insurance is like and how it could help you save on your car insurance. It might be an option that you want to explore. Chances are that we’ll see usage-based car insurance become more and more prevalent in the coming years.
If you want to get some car insurance quotes, we can help you shop your rates. That way you can compare coverages and pricing – and save money on car insurance. To get some quotes, fill out our online form or give us a call today.
Source:
https://www.naic.org/cipr_topics/topic_usage_based_insurance.htm
https://www.thebalance.com/auto-usage-based-insurance-4132461