Pay-as-you-drive tracking is a fairly new concept in auto insurance. It can also be referred to as “Black Box Insurance” and is based on the information gathered by a Telematics device. With it, a carrier installs a tracking device in your car that measures how far you drive, when you drive and how safely you drive during a set period of time, usually 30 days. They then determine your rate based on that information and set your premiums accordingly.
How does it work?
- One of the main things it tracks is what time of day you drive most. Most accidents occur between midnight and 4 am, so if the majority of your driving takes place between these hours, you will attract higher premiums.
- How much you drive is also tracked. The more miles you drive, the higher your chances of being involved in an accident. Standard insurance policies ask policyholders to estimate their yearly mileage, and many people grossly overestimate this figure. Pay-as-you-drive insurance is more accurate and encourages limiting your mileage.
- Finally, they look at how well you drive. The tracking box tracks your braking habits. If you do a lot of “hard braking”, this could indicate that you are not a cautious driver, and you’ll be charged a higher premium.
What are the pros and cons?
If you drive few miles and are a generally safe driver, this type of policy could save you a lot of money. Most companies state that your car premiums will not rise during the initial thirty-day test, but bear in mind that you will constantly be tracked during this time. If you suddenly drive more miles than usual or get careless behind the wheel, this will be reflected in your next renewal quote.
Standard policies will never disappear completely, but many insurance providers will be offering this in the future. Consider it a viable option if you are a safe, low-risk driver!
If you’d like to learn about pay-as-you-drive insurance, click here.