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A Look at Pay-As-You-Drive Coverage
Auto insurance rates are based on a number of things, including where you live, how old you are and how you drive your car. But rates also can be based on how much you drive.
Several insurers tie mileage to rates in some way. For example, some companies give discounts for self-identified low-mileage drivers. Others offer premium brackets based on mileage tracked electronically on your car. And at least one company offers true pay-as-you-go auto insurance. You buy coverage for a specified number of miles; if you drive more than that, you have no coverage.
Mileage-based insurance can result in premium savings for drivers who don’t drive much. A recent study of California drivers by The Brookings Institution concluded that 64 percent would save money – an average of $276 per vehicle – under a pay-as-you-drive plan. Of course, long-distance drivers would pay more -- an average of $393 per vehicle, according to the Brookings study.
The study also revealed a significant side benefit: If rates were based on actual mileage, drivers would drive less in order to save money. And that would save gas, cut pollution and save lives. In fact, the Brookings study found that if all auto insurance rates were based on actual mileage, Californians would drive 24 billion fewer miles a year, using 1.2 fewer billion gallons of gas and resulting in significantly lower emissions and accident rates.
Of course, there is a downside. Obviously, if you drive a lot of miles, you would not benefit from mileage-based insurance rates. But even low-mileage drivers probably would have to give up some privacy for their lower rates. Most policies that offer significant discounts based on mileage don’t take your word for it. They install devices to track your mileage, or they use existing devices, such as GM’s OnStar system.
Some insurers track not only your mileage, but also your driving habits, measuring things like how quickly you stop and start and how fast you drive. Other habits that could be measured include when you drive and where you drive, which could open the door to public policy implementations via auto insurance. For example, a premium surcharge could be added to discourage driving between 7 a.m. and 10 a.m.on designated urban roads as a way to reduce greenhouse gas emissions. This potential invasion of privacy has some observers, and some drivers, concerned.
Of the insurance companies represented by Bensman Risk Management, only one (Traveler’s) has expressed an interest in developing a pay-as-you-drive auto insurance product, but implementation is not a certainty. A 2009 beta test is all that is planned at this time.
If you would like to discuss car insurance or any of your insurance needs, please contact me, or any member of The Bensman Group team, at 847-572-0800 or email@example.com.