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Is Usage-Based Auto Insurance Right For You?

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Have you been looking for ways to reduce the amount of money you are paying out for bills each month? Do you drive your car very little each year? You may be interested in learning about the usage-based auto insurance policies that are available in many states.

What is usage-based auto insurance?

Usage-based auto insurance uses a small gadget that plugs into the OBDII port to gather information about your driving habits. This gadget is then sent or taken to the insurance provider at the time of renewal, the information is downloaded from it, and the information is used to calculate the cost of the premiums for the following year.

What information is used to determine the premium costs?

The information that the insurance company uses to set your premiums is that of traditional car insurance, as well as the number of miles that you have driven the car. So, the type of car that you drive, your driving record and your credit score all come into play as well as the number of miles that you have driven for the year.

In some cases, the insurance provider may also be monitoring the speed in which you drive, the acceleration patterns, the time of day the car is driven, and the distance of each trip to help determine the cost of insurance. If you have driving patterns that could increase the potential for accidents, the rates you pay will increase.

What are the advantages of usage-based auto insurance?

If you practice good driving habits and do not drive many miles each year, you could pay substantially less for your auto premiums each year. This is because traditional auto insurance policies are based on an average yearly mileage. If you drive your car fewer miles than the average driver, you will have lower rates. The fewer miles that you drive the car each year, the lower your premiums will be when the time comes to renew the policy.

Can everyone get usage-based auto insurance?

Unfortunately, usage-based auto insurance is not available in every state yet. There are concerns about privacy that prevent some states from allowing the inclusion of usage-based insurance. Until some of the hurdles are crossed, these states will not pass laws permitting such insurance policies from being written.

Talk with an insurance provider (such as Scovotti Insurance) to learn about usage-based insurance and whether it is available in your area. You may find that limiting the number of miles you drive each year and changing your policy to a usage-based policy could help you better manage your monthly budget.