A usage-based insurance program puts the power of data behind your car insurance premiums. In simple terms, it rates your insurance costs by how much you drive, and what kind of driver you are, giving you a more accurate bill each time you renew your policy.
While they vary by provider, many usage-based insurance programs rely on your car’s onboard diagnostic (OBD-II) port to
track mileage, braking and acceleration ferocity, and time of day.
Others rely on your car’s already installed onboard telematics system, such as OnStar or SYNC, to track this data. Some insurance companies will still take simple, analogue measurements of your odometer to determine your mileage instead.
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What is usage-based insurance?
Usage-based insurance is a type of insurance that offers discounts based on your driving habits and/or mileage. Basically, your driving history and behaviors will be tracked through apps or telematics, and if you're a safe driver or you have low mileage, you can qualify for certain discounts.
How to track gas mileage
Compare available usage-based insurance programs
Because they’re more common now, it’s likely your current car insurance company already offers a usage-based system. According to
The Center for Insurance Policy and Research, there are at least five insurance companies offering usage-based car insurance programs in 23 states alone.
This should make accessing one easier than ever. Just call your current provider to get more details, but it’s still important to get quotes from neighboring companies to comparison shop.
When you do this, have the important questions at your side, including:
- Is a usage-based car insurance program available in my state?
- What tools do you use to track my usage?
- Do you track more than just mileage?
- Do you take a snapshot of my driving habits, or do you track continuously?
- What is the maximum savings I can receive?
- How do you protect the privacy of my data?
- Can my ratesactually increasefrom this?
Disadvantages of usage-based car insurance
There are certain disadvatages associated with using telematics to get usage-based car insurance. For one, telematics doesn't always recognize when you're actually being a safe driver. If someone ignores a stop sign and speeds right in front of you, it might be necessary for you to slam on the brakes.
In this case, you're being a good driver. However, you might receive a lower score on your telematics for braking too hard.
Additionally, some programs may even increase your rates for being a poor driver, so check with your agent before getting usage-based insurance.
Pick the usage-based car insurance that’s right for you
Whether or not you switch insurance companies to get the most savings with a usage-based car insurance program, you’ll want to take advantage of one strategically. This is especially true if the program you pick takes a "snapshot" of your driving habits.
More than one insurance provider does this by giving you a tracker for six months—usually in the form of an onboard plug-in device—to then apply that data to your premiums. This six-month option is great for people who might not feel comfortable about a device that’s constantly tracking your driving behavior.
If you do go with the constant monitoring route, your driving needs to be
safefrom the start. This means careful acceleration and braking, no late-night driving, and yearly mileage typically less than 12,000. If this seems like you, you likely will see the most benefit from a system that stays connected to your car all the time.
Another "no-brainer" is the method that taps into your car’s already installed telematics system. For example,
State Farmmay offer tracking services for drivers with SYNC-equipped Ford vehicles, eliminating the need for an extra plug-in device.
Usage-based car insurance programs are a great way to save, but taking advantage of one can be tricky. For some, this is a great way to save some money, but it’s not for everyone.
If you want cheaper car insurance but you're still uneasy about telematics, give
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