Imagine paying for auto insurance based on how much you drive. Instead of having your car insurance rates based solely on factors you cannot control including your age, your gender, where you live and your credit score, your rates would reflect the number of miles you drive in a year.
“Pay as you drive” insurance is here and with it comes a new option for consumers who want to save money. This new arrangement, however, does come with some strings attached, including surrendering certain personal freedoms.
For consumers who drive a few thousand miles annually, pay as you drive policies may be an attractive option. Insurance companies know that the fewer miles you drive, the less likely you’re going to have an accident. Not many insurers have been willing to base auto insurance rates on miles driven, given the complexity of verifying that information. Thanks to telematics technology such as offered by OnStar, Entune and SYNC, auto insurers may be willing to reduce insurance premiums in exchange for monitoring your mileage and perhaps your driving behavior.
Pay as you drive policies are approved at the state level once insurance regulators have established some guidelines. Progressive Insurance offers its “Snapshop” insurance in 27 states and Allstate Insurance has rolled out “Drive Wise” in Illinois and is expected to expand this option to more states in 2011 reports Edmunds.
The Progressive and Allstate plans take into consideration driving behavior along with miles driven. These auto insurers track your braking and acceleration patterns as well as the time of day you drive. Expect to pay more if you have a lead foot or if you’re given to driving late at night or in the early hours of the morning. There is much less traffic on the road during those times, but driver fatigue is a significant contributor for accidents.
Not everyone is smitten with pay as you drive auto insurance, including privacy advocates who see this option as one more way for consumers to slowly lose their rights. Advocates worry that auto insurers will track where you go and how fast you get there. Insurers contend that the information they glean is limited to how safely and how long you drive and is not based on other factors.
Will your teenager benefit from pay as you drive insurance? Perhaps yes. With auto insurers able to track behavior and miles driven, they’ll know enough about teen driving habits to set rates accordingly. Your youngster may not admit to careless driving, but that behavior will become readily apparent the next time you open up your car insurance bill.
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