Find out how pay-as-you-drive insurance works, which companies offer it, and if enrolling could be a smart move for your finances. Get the Money Girl book: http://MoneyGirlBook.com
Money Girl
332 MG Can Pay-As-You-Drive Insurance Save You Money?
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Thanks for downloading the MoneyGirl podcast. I'm Laura Adams, your host and the author of the award-winning book MoneyGirl Smart Moves to Grow Rich. Would you be willing to install a little gizmo in your car that tracks how you drive? If it could save you money on car insurance, more insurers are offering this technology. But so far, consumers are not beating down their doors for it. In this episode, I'll tell you how pay-as-you-drive insurance works, which companies offer it, and whether enrolling in one of these insurance programs could be a smart move for your finances. Pay-as-you-drive insurance goes by different names, such as usage-based insurance, mile-based insurance, and telematics. That word, by the way, is a hybrid of telecommunications and informatics. No matter what it's called, the purpose is to set auto-insurance rates based on your actual driving behavior instead of historical data and demographics, such as your credit, age, and gender. The idea is to reward safe drivers by charging them less. Telematics technology makes it possible for an insurer to see exactly how skilled a driver is, except in a few states. Alaska, California, Hawaii, Indiana, North Carolina, and Tennessee generally don't allow carriers to use telematics to offer car insurance discounts. When you enroll in most pay-as-you-drive programs, the insurance company sends you a small device that typically plugs in somewhere underneath your steering wheel. Other programs may work with existing vehicle technology, such as OnStar. Data about how you drive is sent to your insurance company so they can assess your risk and set your rate. So, what can a telematics device track? Well, these electronic spies can collect a wide variety of information about you and your vehicle, such as how many miles you drive, the speed you drive, the times of day you drive, how much time you spend driving, how hard you hit the brakes, and how fast you make turns. The major advantage of usage-based insurance programs is that the best drivers might save 40% or more off-standard rates. And some companies give you as much as 25% off just for enrolling in their usage-based program. I'll tell you which insurers offer them in just a moment. Drivers who probably have the most to gain are those who are paying high rates because they're young, have a sketchy driving history, or even have a low credit-based insurance score. I covered the topic of credit-based insurance scores in a previous podcast, which is episode number 331, called What You Should Know About Credit-Based Insurance Scores. Some proponents of telematics say these insurance programs could improve our driving standards when they eventually catch on with more consumers. They figure poor drivers will shape up so they can cut their auto insurance costs. Get your holidays started with the perfect tree and your perfect style from the Home Depot. 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Head to policygenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's policygenius.com. I love learning and anything that makes learning easier. If you're a parent and your child needs some homework help, then Ixcel is a right for your family. Ixcel is an online learning program for kids covering math, language arts, science, and social studies. Ixcel has interactive practice problems for topics from pre-k to 12th grade and everything is organized by grade and subject. As kids practice, they get positive feedback, awards, and explanations for wrong answers. Ixcel figures out what your kids need more help with and recommends more topics to practice. Their videos, lessons, sample problems, and learning games, too. One subscription to Ixcel gets you all subjects and all grade levels. Membership started just $9.95 a month. It's no wonder Ixcel is used in 95 of the top 100 school districts. I think the positive feedback that Ixcel gives is really crucial when it comes to learning. So make an impact on your child's learning, get Ixcel now, and money girl listeners can get an exclusive 20% off Ixcel membership when they sign up today at ixl.com/moneygirl. Visit ixl.com/moneygirl to get the most effective learning program out there at the best price. These some drivers will opt for public transportation instead to reduce annual miles driven. Some devices can be made to beep at you when you drive too fast, hit the brakes too hard, or even alert emergency services after a crash or theft. You may be able to go online or receive reports to see how well you're driving. The disadvantage of usage-based insurance programs is big brother privacy concerns. Many people worry about the implications of being tracked or having their data shared. Different insurers track and evaluate different information, but most pay-as-you-drive programs say their devices don't have GPS and therefore can't track you. However, studies have shown that an insurer could estimate your location using other data like the time, your speed, turns made, your home address, and the distance driven. So perhaps there is a false sense of privacy. But smartphones are another type of device that track much more information than most realize, and that has a cut down on their use. For some pay-as-you-drive programs, the telematics device only stays plugged into your vehicle for a short period of time, such as six months, and then you can remove it. That's enough time for the insurer to get a valid snapshot of your driving patterns and set your permanent rate. In fact, that's why Progressive's program is called Snapshot. Progressive is just one of several top insurers that offer a pay-as-you-drive program. But they're leading the pack with over 1.5 million drivers enrolled. They're watching three main driving behaviors. How many miles you drive, how often you drive between midnight and 4 am, and how often you slam on the brakes. If Progressive deems you a good driver, your savings could start as soon as 30 days after enrollment. All states pay-as-you-drive program is called DriveWise, and it's only available in 22 states. It rewards you for driving low miles at safe speeds and avoiding hard stops and driving during the early morning hours. It continues to provide feedback to users, as long as you keep the DriveWise device installed in your vehicle. It farms program is called Drive Safe and Save. It's available to policy holders who have OnStar, InDrive, or Sync, communication services. It collects information about your driving through those technologies and can save you up to 50%. And the last insurer I'll mention is GMAC. Their insurance offers a usage-based program that's offered to OnStar subscribers in 35 states. Low mileage discount program 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. Users 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. To read a transcript of this show, connect with me on Facebook, Twitter, or Google+, visit the newly redesigned MoneyGirl page at quickanddirtytips.com. I love getting your money questions, so keep emailing them to me at money@quickanddirtytips.com. I'm glad you're listening. Good to change. 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