TUCSON, Ariz. - Roger Lane recently signed up for usage-based car insurance. He’s hoping to save 20-30% off the $2,500 dollars he’s been paying yearly on premiums. But with a tradeoff: Drive safely and log fewer miles. Numerous major insurance companies like State Farm, Nationwide, Allstate, and Liberty Mutual offer the program. Using a smartphone app and a tag or dongle, insurance carriers monitor acceleration, braking, cornering, speed, and phone use and provide a score.
If your score indicates low risk driving, your premiums could be reduced significantly, in some cases up to 50%. To get the discount you’ll also need to watch how far you drive. State Farm for example, considers 7,500 miles a year or less low mileage. But if your driving suggests risky behavior, some insurers could charge you even more. And while some companies say they don’t share your information, for some people, privacy may be a concern.
“If you’re in an accident, your information can be used, for example, by law enforcement," says Consumer Reports Money Editor, Tobie Stanger.
To keep your car insurance costs low, make sure you’re taking advantage of all available discounts. Ask about discounts for the safety and security features built into your car, good student discounts, even discounts for maintaining a good credit score!