Would You Be Better Off with PAYD and Usage Based Auto Insurance?
These days, saving money has become an important part of our everyday lives, especially when it comes to auto insurance. As a result, more people are looking into what’s called Pay As You Drive (PAYD) and Usage-Based auto insurance. Because, up until now, insurers were unable to be in the car with you to see how well you drive and how many unnecessary risks you might take behind the wheel on an average day, they had to rely on other information. Most of the time, they consider your driving record, your age, gender, and the amount of miles you drive.
By taking these factors, among others, into account over the years, insurance companies have “predicted” how risky of a driver you are and how many potential claims you’ll file. Unfortunately, fairness wasn’t considered and many motorists, who had been good drivers all their lives but ran into a little bad luck, were pigeon-holed into paying much higher premiums. But, the growing popularity and availability of usage-based insurance is changing all that.
“Usage-based” insurance are programs offered by insurers that base your policy rate by how you actually drive as opposed to how your insurance company believes you drive. While you’ll be required to install a small electronic device in your vehicle, designed to transmit driving information to your insurer on a daily basis, the slight inconvenience can prove to be an advantage to your wallet in the long run. If the data being relayed to your insurer shows you to be a better than average driver, you may be eligible for a discount on your policy.
It must be noted that usage-based programs deviate somewhat from insurer to insurer. They often use different types of equipment, as well as a variation in the tracking of driving habits. And, typically, there are two main categories of usage-based insurance: mileage only and overall performance.
At the time usage-based insurance was first introduced, mileage-based was the only kind available and was known as pay-as-you-drive (PAYD) insurance. The sole information tracked was mileage. These programs remain available today, depending on the insurer.
In recent years, insurance companies have introduced programs that not only track mileage, but also track overall driving habits behind the wheel, including how hard you brake, how hard you turn, and if you’re prone to exceeding speed limits.
PAYD programs are pretty plain and simple: the less mileage you drive the better your rates. Your insurer will request your odometer readings at regular intervals, generally at policy renewal periods of 6 months or 1 year. Some programs may require earlier check-in periods.
With overall driving behavior and performance programs, the process is slightly more involved. Once you’ve enrolled in the program, a special device will need to be installed in your car to transfer data to your insurer. Usually plugged directly into your vehicle’s diagnostic port, these devices use transmitting technology known as telematics to interpret how drive into data that your insurance company can apply to determine your habits as you drive down the road.
For the convenience of drivers participating in the program, many insurers post driving data online to be viewed in real-time. This is to allow drivers to more readily adapt safer habits on the road to receive discounts on their insurance coverage. The behaviors most commonly tracked in usage-based programs are:
How you turn
How hard you brake
How fast you accelerate
The time of day/night you drive
Following your enrollment in a program, you can often expect to:
Receive an initial enrollment discount
Receive a telematics device, generally in the mail, to install in your vehicle
Undergo a mandatory testing period to monitor your driving behavior, which could be a period of 6 months to a year
Receive an adjusted policy discount, normally at renewal time, based on your overall driving performance during the set testing period.
So, if you’re a good driver and saving money is on your mind, you may want to give usage-based insurance some consideration to possibly lower your annual premiums.
Whether you’re shopping for a usage-based program or new coverage…compare to make sure you’re getting the best rate on your auto insurance. Why not get a free auto insurance quote today?
Do you or someone you know have usage-based insurance? Feel free to share your thoughts in the comments section below.