Usage-based car insurance is becoming popular among leading insurance companies because it is the most effective means of calculating insurance prices based on driving habits and patterns. They monitor your habits by attaching their GPS tracking device that monitors your speed, braking, and time of driving. One big upside to this kind of insurance is that even if you don’t end up with a discount, most companies won’t penalize you for poor driving habits. Every insurer does not offer this type of insurance, but more and more companies are adding it because consumers are flocking to it for its ability to lower prices.
For drivers confident in their driving abilities and willing to be monitored by an insurance company, usage-based insurance provides discounts based on these factors. Each part of your driving is monitored through a device in your car. This device keeps track of how fast you are going, how tightly you are turning, and how hard you are braking. One striking downside to this type of insurance is that it is also affected by the times you drive. For regular daytime commuters, this is a cost-effective way to find even lower prices on insurance. Though for nighttime drivers, this could pose a problem because insurance companies actually look at driving at night as a negative, so this could cause your rates to stay the same or in some cases, even go up.
Types of Usage-Based Insurance
Pay How You Drive
“Pay How You Drive” Insurance is when an insurance company inserts a monitoring device inside your vehicle. The way that these insurance companies look at your driving is based on your habits. These habits include your average speed, braking habits, and how tightly you take turns. By analyzing these, they are able to give you a new risk factor that is outside of the common factors.
Pay As You Go
“Pay as You Go” insurance is when an insurance company uses a monitoring device that tracks how often you drive. Paying per mile is a cost-effective means of paying for insurance for drivers who don’t frequently use their vehicles. The way that companies track this is by a monitoring device that keeps track of how often you drive.
Insurance Fact
Problems with Usage-Based Insurance
There are some big problems that customers face with usage-based insurance. This technology was only introduced 12 years ago, and there is still plenty of work to be done before it will be adopted by every insurance company. A common complaint with these monitoring devices is that it penalizes drivers whose car has fully broken down. The device is then not able to collect any data on your driving and as a result, will end up charging you anywhere from 15-150 dollars a day. This technology lacks the ability to be able to differentiate between a user intentionally unplugging the device to save money and a user that has experienced a hardship preventing them from using said device. One way to combat this though is to call your insurance company and update them when the device comes back on.
Another problem with usage-based car insurance is that it can actually increase your insurance in certain situations. For example, drivers who don’t perform well with “pay how you drive” insurance may be penalized. Studies have actually shown that about half of drivers don’t see a positive impact from these devices. The decision to have an insurance company monitor your location 24/7 can sometimes not be worth it if you’re driving habits aren’t up to par with their standards.
A quick look at usage-based Insurance prices leads us to this information.
Avg. Cost per Mile: $2.50
Example: 150 miles a month x $2.50 = $375 a month.
This is far higher than the average insurance for most Floridians. It also reiterates the fact that this policy is for drivers who do not drive frequently.
| Average Cost Per Year | State Minimum Car Insurance | Basic Full Car Insurance | Full Car Insurance |
|---|---|---|---|
| Florida | $835 | $1,620 | $1,920 |
| Texas | $718 | $1,565 | $1,842 |
| Tennessee | $539 | $1,354 | $1,583 |
Is Usage-Based Insurance Worth It?
It depends. Usage-based insurance has been taking the world by storm for the past 12 years. It offers drivers the ability to save anywhere from 10-30% on auto insurance by simply having their driving data monitored. For some drivers looking to save money and don’t regularly drive, this could be perfect.
Usage-Based Insurance is also perfect for drivers who are confident in their abilities to drive that don’t mind being monitored.
Usage-based car insurance is a relatively new type of auto insurance that promises to save you money based on your driving patterns.
