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Should You Buy Pay-As-You-Drive Insurance?

Car insurance companies have released numerous television commercials, pleading consumers to sign up for what is commonly called pay-as-you-drive insurance, although some in the industry prefer the term “usage-based insurance.” You’ll also hear this type of insurance referred to as telematics, which describes the joint usage of technology and information. Find out if you should buy pay-as-you-drive insurance and check home and auto insurance quotes online.

auto1 - Cars-to-InsureThe idea behind pay-as-you-drive insurance is that if you are as good of a driver, you shouldn’t mind attaching a device to your car – usually to your auto’s onboard diagnostics port – that collects information about how you drive, such as how you hard you brake and whether you tend to have something of a lead foot.

Insurers promise consumers that they’ll save anywhere from 20 to 50 percent; just how much depends on your insurer. Some insurers offer an immediate discount, usually 5 or 10 percent, for simply installing the device. Some of the big companies, like Progressive, Allstate, State Farm, Travelers, Esurance, the Hartford, provide this type of insurance.

These devices measure a car’s speed, the time of day or night that driving is done and the mileage. Some, like Travelers’ IntelliDrive, have a GPS component, in which you can track where you’ve been driving. Some critics have suggested that there’s an ominous Big Brother aspect to this type of tracking, which is why most insurers aren’t utilizing GPS. But proponents see the data, including the GPS information, as a “Big Parent” approach, one that their customer-parents will welcome. For instance, Travelers’ IntelliDrive program can send speeding alerts to the consumer – which can be helpful to know if your kid is out driving the car. And the financial rewards are great. Travelers offers a 10 percent discount just for signing up, and then an additional discount of up to 30 percent that’s based on the average miles the vehicle is driven each week. You’ll get some kind of discount as long as you don’t exceed the annual threshold of 13,000 miles, but most people won’t get the full 30 percent. This low-mileage car insurance program is suitable for vehicles that are driven rarely or used only for short trips.

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