Many auto insurance companies offer policies that adjust what you pay based on how much you drive or how well you drive. Here are some things to know when deciding if this type of policy is right for you.
1. Pay-by-the-mile policies
These policies charge you a base amount plus a fee for the number of miles you drive each month. Most companies measure this through a device attached to your car’s computer. If you have an older car without a connection, ask your company if you can take a picture of the car’s odometer instead.
Pay-by-the-mile policies might be good for people who work from home. Some companies offer a cap on the number of miles you drive each day so you don’t get charged too much for the occasional road trip.
2. Usage-based policies
Usage-based insurance policies also use a device plugged into the car’s computer or a phone app to monitor how you drive. They look at where and when you drive, how fast you go, and your braking and acceleration habits, among other things.
Your insurance company uses that information along with other factors – such as your age, type of car, and driving record – to set your cost.
3. Is it a good deal?
These types of policies could lower your premium cost if you drive safely or don’t drive a lot. Be sure to get an estimate and compare it to the cost and coverage of your current policy.
- The National Association of Insurance Commissioners Drive Check tool can help you figure out if a usage-based policy could save you money.
- The Federal Highway Administration says the average car is driven 13,476 miles a year, or 1,123 miles each month. If you usually drive less than that, a pay-by-the-mile policy might be a good choice.
4. What about my privacy?
Here are some questions to ask when considering these types of policies:
- What device will my insurer use to track my driving? What exactly will be monitored?
- Do I want my company to have information about my driving?
- Am I a good driver? Do I think my driving style will help lower my premium cost?
- How much could I save?
- Could that information be used after an accident?
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- Ask students if they would consider pay-by-the-mile auto insurance policy. Why or why not?
- Ask students to talk to friends or relatives who might have pay-by-mile insurance policy. What can you learn from their experience?
- What type of drivers should consider pay-by-the-mile auto policy?
- Under what circumstances pay-by-the-mile auto insurance policy could lower your premium?