Find out if Usage-Based Car Insurance Is Right for You

Today’s technology makes it possible for car insurance companies to monitor your driving. As a result, they can offer usage-based car insurance. The rates on your insurance are based on your driving habits. Most programs started out as a reward-based program only. If you exhibited safe driving habits, you received a hefty payout on your renewal date. If you didn’t exhibit safe driving habits, you just didn’t receive a payout, but your premiums never increased. Today, however, some companies do penalize for aggressive driving behaviors.

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Find out if this type of insurance is the right choice for you.

How Does Usage-Based Car Insurance Work?

Usage-based car insurance is like a ‘pay as you go’ policy. The insurance company bases your premium on your driving habits. They do this by placing a device in your car that monitors your speed, braking habits, and the miles you drive. It also monitors the time of day you drive. The combination of each of these factors helps determine your premium. Obviously, the less risk you pose, the lower your premiums. In other words, the better your driving habits, the more likely you are to save money on your insurance.

Who Should Use Usage-Based Car Insurance?

Now you know how it works, but who best benefits from the program? Honestly, everyone benefits in some manner. Even if you don’t save money, it gives you a snapshot of your driving habits. As you get used to driving, you may not realize the bad habits you exhibit. Once you realize those habits are costing you money, it could make you a safer driving, but forcing you to change them in order to save money on your premiums.

Aside from the money savings, though, there are particular people that would do best with this type of policy. They include:

• Drivers who drive few miles – Right now most insurance policies are a one-size fits all. No matter how many miles you drive, you pay the same premium as other drivers. With the usage-based policy; however, you could get a refund based on the few miles you drive.
• Drivers with little to no traffic violations – If you don’t have traffic violations, chances are you are a safe driver. You’ll be rewarded with the usage-based policy. This assumes, of course, that you don’t speed, break hard, or exhibit other aggressive driving behaviors.
• Young drivers – New drivers have little experience and may not understand the consequences of poor driving habits. Having a monitor give them feedback can make them a safer driver in the long run.

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Who Shouldn’t Use Usage-Based Car Insurance?

There are certain drivers that would not benefit from usage-based insurance and could even pay more as a result. They include:

• Nighttime drivers – Insurance companies look at nighttime drivers as high risk. It’s not your habits necessarily, but the higher risk of being hit by a drunk driver or another debilitated driver on the road.
• Aggressive drivers – This goes without saying. If you know you are an aggressive driver, speeding and constantly putting your life and car at risk, you won’t want your driving monitored. It could only end up hurting your pocketbook in the end.
• Rush hour drivers – If your daily commute includes driving during the primetime rush hour in your area, you may want to skip out on usage-based insurance. Again, it’s not your habits, but the habits of others on the road. There are just many more vehicles on the road during rush hour, increasing your likelihood of an accident.
• Long distance drivers – If you drive excessive miles, don’t apply for the usage-based monitor. You’ll only end up paying more because you are a higher risk due to the number of miles you drive.

Privacy Concerns

You may want to consider the privacy concerns that come along with carrying a monitor in your vehicle. While the insurance company is held to a privacy policy, there are certain situations when a third party may have access to your information. If any information caught on the UBI monitor can be used in a court of law, chances are others will have access to it. This means the data could place you in the wrong place at the wrong time, creating a lawsuit or sentence against you.

Of course, this is the worst-case scenario. The monitor can also work as your defense and help you in situations where you would otherwise lose the case. It’s a 50/50 shot that you have to think about the consequences when using. If you are not the type to be up to ‘no good instances,’ then you don’t have a lot to worry about. But, if there is even the slightest chance of your whereabouts causing legal issues for you in the future, you may want to avoid it.

Deciding whether you should take usage-based insurance is a personal decision. Luckily, you have the option to take it and then eliminate it in the future if you don’t like it. Let’s say you opt-in and then realize that your driving habits are not as safe as you thought. You can ask the insurance company to re-rate you on a standard policy. As with any financial decision, weigh the pros and cons to determine which option is right for you. Just know that you always have options if you change your mind.

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