User Based Car Insurance

Car insurance is an expensive reality of owning a car. As a money conscious individual, I am always looking for ways to decrease my insurance premium. While researching car insurance in Dallas, I stumbled across a program that offers the opportunity for substantial deductions through a program called user based car insurance.

Why You Should Consider A New System?

With traditional insurance, your insurance premiums are not only a reflection of your own driving skills, but also a reflection of the driving skills of your age group, gender, marital status group, and your credit score. If you fall within a group that statistically has a higher number of car accidents, you will also have a higher insurance rate until you can prove that you are a solid driver by driving for years without an accident. Insurance companies work under this philosophy: all drivers are poor driver until proven otherwise.

What You Should Know: Are you a good driver who is tired of being penalized for being a teenager, a male, or unmarried? Usage based car insurance provides an alternate method for companies to determine your risk factor which can help you escape these stereotypes.

What is User Based Car Insurance?

User based insurance is an insurance plan that bases your monthly insurance premium on your behavior while driving and the amount that you drive. Most insurance companies that offer this service advertise 25 to 30% saving. With that kind of savings how can you not sign up?

Road Block 1: Big Brother

The biggest thing that stops users from taking advantage of this plan is the fear of Big Brother. In order to qualify for user based insurance, you will need to install a telematics system or proprietary device into your car diagnostic port. To make a long explanation short, the system or device will record how you drive and how often you drive. As the information is recorded, your insurance company stores it and analyzes it to determine your monthly insurance costs. For people worried about the stored data, the insurance company will not use the information except when:

  • Required by your policy.
  • Used to prevent fraud.
  • Perform research.
  • Comply with the law.
  • The data collected will not be used to resolve a claim unless requested by the vehicle owner.

Is it invasive? Yes. Is it worth it? That is determined on a case by case basis. I think if you qualify for close to the full savings, it might be worth your insurance company collecting a constant stream of information about you.

Road Block 2: Is the Price Right

You should not go into user based insurance expecting 25 to 30% savings. According to “So You’re a Good Driver? Let’s Go to the Monitor” by Randall Stross, more than half of the individuals signed up for user based insurance receive an average deduction of 10%.Whether or not your own deduction will be closer to 1, 10, 20, or 30% will depend on three things: how you drive, how often you drive, and when you drive. If you keep that in mind, you may be able to receive substantial savings.

  • How Often You Drive: User based insurance benefits car owners who drive short distances each month. If you drive longer distances, you will see very minimal changes.
  • When You Drive: If you drive at low risk periods like non-rush hour times and weekends, you can see substantial savings. On the other hand if you drive during high risk periods such as rush hour or nighttime, your savings will be negatively affected. The risk of night driving is based on the premise that you are tired at night. It does not take into account that some of us have jobs that mean that we work at night and sleep during the day. If you are an employee with regular night shifts, you will never achieve the highest savings available.
  • How you drive: You think your drive safe? The technology installed into your vehicle not only records when you drive, but how you drive. In order to receive the full savings, you need to be a safe driver. Or more accurately you need to be safe in the correct ways. The technology will record when you accelerate or decelerate and how many miles you drive over 80 mph. It currently cannot penalize you for swerving, veering into other lanes, or speeding.

Like most things today, user based insurance is geared towards a certain group, particularly day drivers without lead feet and a road rage driven need to tailgate. If you do not exemplify these qualities, you will not see substantial savings, but you could earn some savings. It will be up to you to decide if the savings that you do receive is worth being watched by big brother.

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