Posted on: Dec. 16, 2017 in Auto Insurance

As you’re looking ahead to your 2018 budgeting, you’re probably looking for ways to reduce your expenses in the coming year. One like item you can’t do away with but can eat up a chunk of your monthly finances is car insurance. You may consider it a necessary evil, and the laws in most states agree with the “necessary” part. So how can reduce your auto insurance rate without sacrificing coverage or breaking the law?


Usage Based Insurance

Usage based insurance, or UBI, could be a solution. It’s becoming an increasingly popular type of car insurance. You may have heard of it by some of its other names such as pay-as-you-drive, pay-how-you-drive, telematics, or mileage-based insurance. Essentially, it all comes down to the same thing though: Your car insurance rates are based on how you use your car.

Traditionally, insurance companies take a few standard factors into consideration when they calculate your rate. These include:

  • where you live
  • type of car you drive
  • how much you drive (based on self-reporting)
  • safety features and anti-theft devices in your car
  • driving record
  • demographic information like your age, marital status, and occupation
  • sometimes, credit score.

While it’s possible to make some assumptions about how much risk there is that you’ll get into an accident or have your car stolen, it’s impossible for an insurer to truly understand how you drive your car unless they are there with you.

Your Insurer Could Be Along for the Ride

Since it’s impractical for the insurance company to send someone to ride along with you every day, technology allows them to do the next best thing. Some companies are giving their customers the option to install a telematic device that will monitor various driving habits and report data directly to the company.

What kind of information do these devices record? Insurers are looking to for evidence of risky behaviors, so they typically monitor:

  • hard breaks
  • fast accelerations (peeling out)
  • distance driven
  • time of day
  • speed

Slamming on your breaks frequently could point to distracted driving. The time of day and distance you drive could increase your chances of a collision, particularly during rush hour or overnight. Speeding is a dangerous practice and is often a factor in crashes. An insurer may be able to offer you a lower rate if you don’t pose as high a risk compared to other drivers.

Is It Worth It?

While some may feel that these telematic devices are an invasion of privacy, surveys have shown that the majority of drivers, upwards of 80% in some polls, are willing to use the devices if it means they’ll save money on their insurance. It’s unclear, however, if drivers are more apt to use a devise provided by their insurer or a smartphone app to measure their driving patterns.

If you’re interested in usage based insurance, reach out to your auto insurance carrier to see what they have available to you. You can also do an internet search of insurance companies to learn more about the programs various companies offer. If you’re a safe driver, the potential savings could be big!

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