Usage-based insurance programs base your insurance rate on your driving and can provide a discount on your car insurance if you are a safe driver or drive fewer miles per year.
Measuring driving habits with telematics
Usage-based insurance programs use telematics, which is technology that measures and tracks driving habits. An insurance company can use telematics to monitor drivers and can then reward them for good driving behaviors — or give feedback to help them correct unsafe ones. If you sign up for this type of program, you install a small device in your vehicle (or use a mobile app) that tracks your driving habits and provides personalized feedback to you and your insurance company.
Discounts for safe drivers
Safe driving programs provide a discount for safe driving behaviors. Once you install a small device in your car, or install the mobile app on your smartphone, it begins tracking your driving and measuring things like hard braking, nighttime driving, and fast acceleration – all of which can increase your chance of having an accident.
The information is transmitted for you to view right in the mobile app or on the insurer’s website (for those who install the device in their cars). That way, you can take steps to improve your driving habits and make safer decisions behind the wheel. You might be surprised by what you discover about the way your drive.
These programs usually reward drivers who avoid unsafe driving behaviors, and who don’t accumulate a lot of miles on their vehicles. Because these drivers are on the road less, it makes them less likely to have accidents.
Discounts for low-mileage drivers
If you drive less, there’s another potential way to save on your car insurance costs. Pay-per-mile programs offer the same coverage you find with traditional auto insurance policies, but your premium is based on the number of miles you drive.
This option may make sense based on many factors. You might use public transportation to commute most days, work from home, or have a car that you don’t drive often but also don’t want to put into a vehicle storage policy. No matter your reason, if you don’t drive every day or drive less frequently, pay-per-mile insurance could be a cost-effective policy solution for you.
Driving fewer miles isn’t the only way to save money on your insurance, but it can help make your car insurance cost less.