3 Little-Known Benefits of Usage-Based Auto Insurance

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This could be the ticket to massive savings for careful drivers.


Key points

  • Usage-based car insurance bases car insurance rates on a specific driver’s habits.
  • Many major auto insurers offer it, but it’s optional.
  • Safe drivers who sign up for usage-based auto insurance can get deep discounts.

Usage-based auto insurance isn’t new, but many people aren’t familiar with it yet. It has grown in popularity over the past few years and has the potential to significantly reduce rates for some drivers. But many drivers choose not to participate in usage-based auto insurance, and as a result, they miss out on the following three benefits.

What is usage-based auto insurance?

Usage-based auto insurance is auto insurance based on driver behavior, rather than the general information and statistics used by traditional premiums. Companies obtain this information by monitoring driver behavior over a period of time, either through a mobile app or through a device installed in the vehicle. They track things like:

  • When the vehicle is moving
  • How fast the driver brakes and accelerates
  • How fast the driver is going
  • If the driver seems distracted

Then it uses this information to set a custom rate for the driver. Most car insurance companies that offer this promise not to raise a driver’s rates if monitoring reveals risky behavior, although not all insurers do.

Three Benefits of Usage-Based Auto Insurance

Here are some of the little-known benefits of signing up for usage-based auto insurance:

1. Drivers can get a discount just by trying it out

Usage-based auto insurance is optional, and some people are wary of it because they don’t like the idea of ​​being tracked. So, to entice drivers to participate, many companies offer discounts to those who sign up.

This is an initial discount that drivers get immediately, even before the end of the monitoring period. The exact discount varies by company, but almost all offer participating drivers some type of savings, at least for the period of insurance after they first register.

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2. Safe drivers can benefit from additional savings

Drivers who demonstrate safe driving behaviors could qualify for additional discounts based on their driving habits. Again, this varies by company, but in some cases drivers can save up to 40% on their monthly premiums.

Although less common, some programs focus exclusively on the number of kilometers driven rather than the driver’s behavior behind the wheel. Programs like these could benefit people who work from home or drive infrequently.

3. Drivers can learn things that will make them safer drivers in the future

Some programs have apps that can give drivers personalized feedback on their driving behavior. For example, if they notice that the driver tends to accelerate and brake quickly, they can inform him of this behavior. The driver can then take this feedback into account and adapt their driving behavior in the future, which could reduce their risk of having an accident.

How to start

Drivers interested in usage-based auto insurance can inquire with their current insurance provider or explore what other companies in the industry offer. Insurance companies all call their auto insurance usage-based different things, so look for a program that deals with monitoring driving habits.

Read the program terms before agreeing to participate. Understand what the company will monitor and for how long. Watch how it will also use the information and whether it could potentially increase rates if monitoring reveals dangerous habits. Consider all of this when deciding whether or not to purchase usage-based insurance.

It might not be the right choice for everyone, but it could be an incredible money-saving opportunity for those ready to put their driving skills to the test. These programs will likely only grow in popularity over time, so if a specific insurer doesn’t offer them right now, check back with them in the future to see if that changes.

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