Laura covers what usage-based car insurance is and three facts to know that can save you money. Learn the major pros and cons and how making a change in could drive down your car insurance rate.
3 Usage-Based Insurance Facts That Can Save You Money
If you're willing to give up information about your driving behavior, it can certainly cut the cost of auto insurance.
If you're willing to give up information about your driving behavior, it can certainly cut the cost of auto insurance. Here are 3 facts to help you understand if it's worth switching from a traditional policy to a UBI program:
Fact #1: Poor driving won’t cause your rate to rise
One of the most common concerns consumers raise about enrolling in a UBI program is having to pay more if they don’t drive perfectly. Most insurers claim that rates won’t go up if you’re not the best driver—you simply won’t get a safe driver discount.
The only situation where you might see a rate increase is if you claim to be a low-mileage driver, but then log miles over that amount annually. So be sure to estimate your mileage as closely as possible.
Fact #2: You can still speed (within reason)
As I previously mentioned, some UBI programs don’t monitor vehicle speed as a factor in giving you a discount. But even those that do, such as Allstate’s Drivewise program, only ding you for driving over 80 mph.
None of the programs compare how fast you’re driving against the posted speed limits. For instance, you don’t lose a discount for driving 65 mph in a 55 mph zone. Insurers simply calculate the percentage of miles you log at excessive speeds.
And if you do slip up and exceed the insurance company’s recommended limit, remember that your rate won’t go up—you may just get a smaller discount.
Fact #3: Getting a full discount may take time
Different insurance companies handle UBI discounts differently. Some may offer a small signup incentive, such as a 10% discount, and then apply the full savings at renewal time, which is usually every 6 months.
Progressive’s Snapshot program lets you sign up for a 30-day trial where you install their telematics device. After logging 30 driving days, you get an estimate for how much you can save and the discount is applied to your premium. After 6 months with the device, your permanent discount is applied and you return the device to Progressive. Allstate’s Drivewise program continues to provide discounts to safe drivers as long as you keep their device permanently installed in your vehicle.
How Much Is a Usage-Based Insurance Discount?
You’re probably wondering how much a typical UBI program could save you. State Farm’s Drive Safe & Save program is available to policyholders with an onboard communication system (like OnStar, In-Drive, or SYNC) or using a mobile app on your smartphone. They say you can save up to 50%.
GMAC Insurance offers a usage-based program that’s offered to OnStar subscribers. Their Low-Mileage Discount rewards policyholders who drive less than 15,000 miles per year with a discount of up to 54% based on the number of miles driven. It doesn’t factor in any other driving behaviors besides mileage.
Despite privacy concerns, the market for pay-as-you-drive insurance programs is starting to heat up. Insurers like getting data that helps them filter out and reward low-risk customers. And consumers love having more ways to get personalized discounts, cut their insurance costs, and keep more of their hard-earned money.
Get More Money Girl!
Want to know the best financial and productivity tools that I use and recommend to save time and money? Click here to check out 40+ tools I recommend!
To connect on social media, you’ll find Money Girl on Facebook, Twitter, and Google+. Also, if you’re not already subscribed to the Money Girl podcast on iTunes or the Stitcher app, both are free and make sure that you’ll get each new weekly episode as soon as it’s published on the web.
There’s a huge archive of past articles and podcasts if you type in what you want to learn about in the search bar at the top of the page. Here are all the many places you can connect with me, learn more about personal finance, and ask your money question:
- Dominate Your Dollars - Laura's private Facebook Group
- Money Girl on Facebook
- Laura on Facebook
- Money Girl podcast on iTunes (it’s free to subscribe!)
- Money Girl on the Stitcher app (also free to subscribe!)
- Email: LauraDAdams.com/contact
To learn about how to get out of debt, save money, and build wealth, get a copy of my award-winning book Money Girl’s Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don’t. It’s available at your favorite bookstore as a paperback or e-book. Click here to download 2 FREE book chapters now!