Many auto insurers are offering usage-based policies that base your premium partly on how much or how well you drive. Here are three things to know when deciding if this type of policy is right for you.
1 How does it work?
Most usage-based insurance policies have drivers plug a small device into their car's diagnostic port, which is usually under the dashboard. Others use cell phone connections or apps. All of them send information about your driving to your insurer. That information can include where and when you drive, how fast you go, and your braking and acceleration habits, among other things.
Your insurer then uses the data – along with other factors such as your age, type of car, and driving record – to set your premium. Some companies offer discounts if you don’t drive very much. Others look at when and how you drive and give you a discount for things like driving mostly during the day, not exceeding 80 miles per hour, or not braking hard too often.
2 Is it a good deal?
It could lower your premium if you drive safely and don't rack up a lot of miles. Some companies provide discounts for people who drive less than 10,000-15,000 miles a year, depending on the policy. Be sure to read the policy’s terms closely and know exactly what information your insurer is using and how it will affect your rates. Use the National Association of Insurance Commissioner’s Drive Check tool to gauge if it could be right for you.
3 What about my privacy?
Here are some questions to ask when considering this type of policy:
What device will my insurer use to track my driving? What exactly will be monitored? Do I want my insurer to have information about my driving? Do I think my driving behavior will help lower my premiums? How much could I save ?Could that information be used after an accident?