9/15/2011 12:23 PM ET|
Pay-as-you-go insurance on the rise
Depending on how -- and how much -- you drive, you may be able to save big on car insurance. Still, the coverage is relatively new, and not every insurer offers it.
As job growth stalls and household budgets shrink, more drivers are warming up to cost-cutting pay-as-you-go car insurance programs.
Pay-as-you-go plans peg your insurance premiums to the number of miles you drive. Drivers also receive discounts for avoiding violations and accidents, and for limiting time on the road during peak-traffic hours and late at night.
If you meet all pay-as-you-go requirements, it's possible to save up to 30% on car insurance premiums.
A majority of drivers who took an MSN Money-Insurance.com online poll said they would at least consider driving less if it meant they could save money on car insurance. The poll results were as follows:
Would you be willing to drive less to cut your insurance rate?
- Yes, 24%.
- It depends on how much money I could save, 35%.
- No, 21%.
- I can't drive less than I already do, 20%.
The unscientific poll appeared on MSN Money's homepage Sept. 1-6 and drew 8,702 responses.
Insurers respond to demand
Two of the nation's biggest insurers are now responding to this growing demand for pay-as-you-go coverage.
State Farm, the country's largest insurer, plans to introduce a telematics-based effort dubbed In-Drive to drivers in Illinois this month. Additional states are slated to receive In-Drive in 2012.
Allstate, the nation's third-largest insurer, recently expanded its Drive Wise pay-as-you-go program to Ohio and Arizona after an earlier rollout in Illinois.
It's no coincidence that pay-as-you-go insurance is on the upswing at a time when the economy is in a downward spiral, said Robert Passmore, a spokesman for the Property Casualty Insurers Association of America.
"A lot of companies are offering it, and a lot of people are driving less and looking for ways to save money," he says.
More control, lower premiums
If you join a telematics-based program, you'll typically be asked to install a device in your car's diagnostic port (located below the steering column) that records information such as:
- How many miles you drive.
- How often you brake hard.
- How smoothly you navigate turns.
Initially, privacy advocates raised concerns about these devices and their ability to snoop on drivers. But the success of programs such as Progressive's Snapshot and a GMAC Insurance program based on OnStar technology apparently has convinced more insurers that pay-as-you-go insurance is the wave of the future.
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So your drive distance should determine your risk for an accident, not your driving record? So a terrible driver who only travels a short distance should pay less than a good, responsible driver with a clean record who has to drive further?
Of course not. They'll use those factors to compound your charges!! We'll throw in your credit score, just for good measure. Obviously if you have bad credit, you can easily afford to pay more. It makes perfect sense!! How can any person in their right mind defend the insurance industry? I can only imagine that person has never had to file a claim. NOTHING they do is for the benefit of the consumer. As a business that provides a service we are required to carry, they're entitled to make money. They are not entitled to reap record profits while denying record numbers of claims. But do the research for yourself, don't take my word for it.
My next vehicle will be an electric bike. No insurance or licence necessary. No gas needed either. Along with solar power to recharge it, its basically free.
Im done paying through the nose just to travel around town.. Why people dont demand the rip off end, is beyond me. One only need look at the profits being made, to see how much we are being ripped off and gouged.
Add this to Uncle Sam's proposed "pay by the mile" tax on gasoline: http://abcnews.go.com/Business/Economy/story?id=8145264 and you really begin to see how much this is going to hurt commuters. It makes sense to pay less if you drive less, but if you have no other choice, you'll end up paying more at the expense of local driver's reduced rates. Heaven forbid the insurance industry cut into their profits......
What a nice greedy idea by the insurance industry. They can really put it to their customers while getting very rich. Isn't it expensive enough already to own a car without the insurance companies piling on more?
There are many people, during these tough times, who have to drive far to find work, it is not a matter of choice. Taking a vacation will become prohibitive if you want to drive.
While we are at it, maybe the airlines can start charging by the mile, for safe take offs and safe landings. America may be the mother of invention but lets keep that mother out of our every day life.
I just had a thought, maybe funeral homes could charge for burials by the foot or even the pound.
This sounds just like your x minutes per month cell phone plans. On these plans, once you exceed the number of alloted minutes, the companies really soak you for fees. I suspect that the same thing wil happen with pay as you go car insurance.
The best way to keep your auto insurance costs down is to keep a clean driving record, be older, stay insured with the same company, don't buy collission coverage, if you don't have to (e.g. pay cash for a vehicle which negates the reason to have collision coverage), stick with strict liability and UI insurance coverage, have a solid employment record, pay up front for coverage, avoid commissioned insurance sales agents, and finally have a good credit history.
As far as I see, pay as you go is a gimmick whose time will pass, as the savings are miniscule compared with the benefits that one derives from the program.
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