“The whole idea behind usage based car insurance option is that auto insurance companies track your daily driving habits to determine the risk you posses as a driver and accordingly offer lower rates in premium. In order to achieve this, you need to fit a GPS device (telematics technology) on your car to track your driving records. By doing this you can reduce your car insurance premium by 30%.”
In today’s competitive auto insurance industry there is no standard formula adapted by car insurance companies to calculate your monthly auto insurance premiums. If you reach out to five different auto insurers, you will get five different numbers and the best choice for you will be to go for the lowest monthly premium. Keeping in mind that the auto insurance package suits your requirements and coverage limits as expected. To survive in car insurance industry as an insurance provider, innovation is the key and it led to pay as you go car insurance option for consumers. One other factor, which is prominent is the huge variation in auto insurance rates based on the place you live. Ohio, for example is among the cheapest place to live to purchase car insurance. The average annual rate is well under $1000 and the cheapest auto insurance option is just under $500. As per a recent study by a well known company in the car insurance field the national average was around $1,300. So, we can see that even these numbers might be expensive for some.
Usage Based Car Insurance At A Glance
- Your driving record is captured through a high tech telematics device fitted in your car and this helps the insurer to calculate your monthly premiums based on miles driven.
- The pricing of usage based car insurance program deviates drastically for a standard auto insurance product. It is not based on your credit score, gender, age and marital status. Each UBI program is solely based on your driving frequency on miles driven. You don’t even have to worry about location based pricing, type of vehicle and deductibles.
- Usage based car insurance programs are designed to utilize your current driving behavior rather than relying on historical data. This is a fair judgement of your risk factor as a driver.
Advantages Of Usage Based Car Insurance Programs
- Not limited to a hefty contractual auto insurance with high monthly premiums and illogical clauses.
- Freedom of paying on per mileage driven basis
- Certain personal driving traits are considered in determining your auto insurance rates which are independent of any general historical data giving you a fair chance of paying for insurance based on your own merit. If you are paying high premium in usage based car insurance, then it’s based on your personal risk factors your accountability.
- As still the popularity of usage based programs is in its nascent stage, but growing rapidly, some of the insurance providers like progressive are offering it for test for one complete month FREE.
- This UBI is gaining a lot of popularity as it helps in cutting the cost of auto insurance premiums in a weak economy.
- Discounts are available through “Low Mileage Car Insurance Discounts”
Drawbacks Of Usage Based Car Insurance
Although, the UBI programs are well accepted and respected among drivers, there is one major concern which might
trouble some individuals. That is privacy. As your driving risk factors are judged through new rules, you need to have a GPS (Telematics) device fitted in your car which records your personal driving data. (average miles driven, how fast you drive, how hard you brake, where you drive). You may not be comfortable sharing all this information.
Progressive, which is the biggest player and pioneer in the usage based car insurance market, claims that they do not use a device which records your location so people shouldn’t be worried about be traced. Having said that, some insurer’s might use GPS devices.
Some of the companies offering usage based car insurance options are:
- Progressive (through “Snapshot”)
- Allstate ( through “Drive Wise”)
- Hartford Financial Services (through “True Lane PAYD Plan”)