Save on Premiums With Pay-as-You-Go Car Insurance

Don't want to get locked into a demanding contract or high monthly fees? Then just pay as you go! It's a popular way to finance a mobile phone, but now you can also pay as you go for your car insurance.

For certain people, a pay-as-you-go insurance plan can make a lot of sense and save a lot of money. After all, car insurance is a major expense for many Americans.

The national average annual premium for sedans is about $1,000, though that can vary by a wide margin. For example, in New Jersey, which has some of the highest rates in the nation, the average annual car-insurance premium is about $2,500. In Michigan, it's about $2,000.

Whether you pay $2,500, $1,000, or even $600 per year, car insurance can really pinch a budget, and it's especially frustrating if the insured driver doesn't even take the wheels for a spin very much. That's where "pay-as-you-drive," or PAYD, insurance comes in.

How It Works

Pay-as-you-drive plans involve installing a monitoring device onto your vehicle that typically records when you drive, how far you go, and also how often or hard you brake. As a result, it's your own personal driving characteristics that dictate the premium you're quoted. (Some plans, now or later, will let parents monitor and even restrict teenage drivers.)

In many ways, this new offering improves on the traditional model of car insurance. The old-fashioned approach would price your premium based on factors such as your age, gender, marital status, and even your credit rating. Young, single men, for example, tend to be quoted the highest rates, but many young, single men are careful and responsible drivers, penalized for the behavior of their peers.

Those who stand to gain the most will drive the fewest miles, ideally not at rush hour, and won't exhibit characteristics of aggressive driving, such as frequent or hard braking. Telecommuters and small-town residents are promising prospects.

Who Offers It

Right now, about eight of the top 10 car insurers now offer pay-as-you-drive coverage.

Progressive (PGR) calls its offering "Snapshot" and is offering drivers the chance to test it for free for one month. Its device is plugged into your dashboard, and you're able to review its data online. When the month is up, Progressive will use that data to quote you a price for coverage. Other systems don't use a plug-in dashboard device, but rely instead on certified odometer reading, or the cooperation of OnStar technology.

Allstate's (ALL) system is called "Drive Wise," and the company is offering customers who try it a one-time 10% discount just for doing so. State Farm recently expanded its PAYD coverage to about a dozen states, suggesting that those who drive the least might be able to save 40% and possibly even 50%. (It estimates that a typical driver who covers about 11,000 miles per year would save roughly 12% with a PAYD plan.) Hartford Financial Services (HIG) offers a TrueLane PAYD plan in about half a dozen states.

How Much Can You Save?

It's estimated that about 70% of those who try PAYD insurance will be able to save money with it -- and that savings can be as much as 30% of their regular premium.

Folks at the Brookings Institution have estimated that if everyone used PAYD insurance, two-thirds of households would save about $270 per car.

There are even broader benefits possible if all of America were to adopt PAYD insurance. Per the Brookings Institution: "We estimate driving would decline by 8% nationwide, netting society the equivalent of about $50 billion to $60 billion a year by reducing driving-related harms. This driving reduction would reduce carbon dioxide emissions by 2% and oil consumption by about 4%. To put it in perspective, it would take a $1-per-gallon increase in the gasoline tax to achieve the same reduction in driving."

Savings vs. Privacy

PAYD is not a perfect solution to the car-insurance challenge. One of the biggest knocks against it is that it invades your privacy. After all, the insurance company isn't going to just take your word that you only drove your Camry 23 miles in the last month.

Worried that you might try a pay-as-you-drive plan, not be offered a better rate, and then find your premium hiked because of the insurer's findings? Progressive says that won't happen. It also points out that its device doesn't use GPS technology, so it's not keeping tabs on where you go. (Some insurers may employ devices with GPS technology, though.)

As more data are collected under this new system, it will be possible to set rates more accurately, and more insurers will be likely to start offering PAYD. Progressive has reportedly collected 5 billion miles' worth of data already.

So the next time you renew your policy, give pay-as-you-drive insurance some consideration. Ask your insurer if it's offered and whether you can take it for a test-drive.

Longtime Motley Fool contributor Selena Maranjian, whom you can follow on Twitter, holds no position in any company mentioned. Click here to see her holdings and a short bio.

                       the source :http://www.dailyfinance.com/tag/car+insurance/

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The Hidden Costs of Cheap Car Insurance

Would you willingly let your car insurance company play backseat driver every time you hit the road?
                           
Hundreds of thousands of drivers have already invited auto insurance company Progressive (PGR) to ride along. Lured by the prospect of substantial discounts on their car insurance, these drivers are allowing the company to track their driving behavior through its "Snapshot" usage-based program.

Progressive isn't the only company hitching a ride with customers who don't mind their every turn being tracked. (See "Save On Premiums With Pay-As-You-Go Car Insurance" for more.)

Are you really rewarded for good driving?
Progressive claims that its Snapshot program rewards "good drivers" by offering discounts of up to 30%. But a closer look at the driving behaviors they track shows that is not strictly true.

After it's been installed in your car, the Snapshot device collects data about miles driven, the time of day one drives, and braking patterns. While this information may reveal a great deal about the degree of risk a driver imposes on an insurance company, it does not say much about whether someone is a good driver.

To see how this is the case, let's take a closer look at how Progressive uses this data to rank customers as high-, medium-, or low-risk.

• Miles driven: Progressive recommends that drivers not drive more than an average of 30 miles per day (about 11,000 miles annually) if they want to receive a discount. Driving a greater number of miles makes people greater insurance risks. After all, the more people drive, the more likely they are to get into accidents. But mileage alone doesn't make someone a bad driver.
• Driving times: Progressive rewards drivers who are on the road during times that pose lower risks for accidents. For example, it is more likely to reduce rates on customers who do most of their driving in the middle of the day than customers who regularly drive in rush hour traffic. The company is also less likely to decrease rates on those between midnight and 4 a.m. Prospective customers should note, though, that while information about the times of day people drive may indicate their level of risk for accidents, it does not indicate their driving ability.
• Brake patterns: Progressive also rewards drivers who have fewer "hard brakes," (i.e., fewer instances in which they decrease their speed by more than 7 miles per second). While this information can indicate bad driving habits, such as tailgating, braking patterns often have a lot to do with the driving conditions.

So it's not quite accurate to say Progressive's Snapshot program rewards good drivers. Rather, it rewards lower-risk drivers. Good drivers who have long commutes, live in urban areas, or whose schedules require them to drive during high-risk times won't qualify for the discount.

In fact, if that describes your driving patterns, you may end up paying more for your car insurance over time.

The trade-offs
Consumer advocates are concerned that Progressive's Snapshot program will eventually be used to raise rates on customers. And the move toward this outcome may not be straightforward.

Progressive claims that it will not raise rates based on the data gathered through the Snapshot program. However, if lower-risk drivers are earning discounts of up to 30% for their lower-risk behavior, it's likely that Progressive will want to recoup some of the expenses incurred by its higher-risk customers. One way to do this would be to increase the starting rates on customers who do not want to participate in their tracking program and those who do not meet its standards for "good" driving.

Also worth considering is the impact Progressive's Snapshot program will have on the auto insurance industry as a whole. As Progressive reaps the rewards associated with gaining more low-risk customers, other companies will have to make a choice -- either increase rates as the percentage of high-risk drivers in their customer base rises, or implement Progressive's strategy and create increasingly granular insurance offerings to match the risk levels associated with each customer.

So while some drivers may indeed see declining insurance rates, many others will see them rise, through no fault of their own. So before opening your car door and letting your insurer ride along, take a closer look at how the program works, and determine whether the trade-offs are worth the rewards.

Motley Fool contributor M. Joy Hayes, Ph.D. is the principal at ethics consulting firm Courageous Ethics. She doesn't own shares of any of the companies mentioned. Follow @JoyofEthics on Twitter.

                            the source :http://www.dailyfinance.com/tag/car+insurance/

                            

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Buying Car Insurance: You Better Shop Around

With more and more car insurance providers offering online quotes and sign-ups, switching policies is now easier than making a three-point turn. According to a study by InsuranceQuotes.com -- owned by Bankrate (RATE) -- 21 percent of Americans shopped for car insurance in the past 12 months, and of the nearly 43 percent of those who switched carriers, 81 percent said cost was the primary reason. Switchers do their homework: 34 percent of shoppers obtained at least three quotes; 26 percent obtained four or more.

When to Make a Change

Some insurers charge a fee for breaking a policy mid-term. So, unless the savings from the new policy are significant to offset such fees (and the coverage is comparable), it's best to wait to start comparison-shopping until several weeks before your policy is up for review and renewal. If you decide to switch, allow enough time to for the new policy to take effect, then cancel the existing policy before its automatic renewal.

Seek Out Hidden Discounts

Do you carpool once or twice a week? Pay your insurance bill annually? Use automatic bill pay? Each of these things can provide you with significant savings. Many companies offer substantial discounts for drivers who complete a defensive driving course, or who can show proof that they've taken a course through another provider or the workplace recently.

The best ways to learn about potential discounts are to check the company's website or ask an agent. Do both: One source might provide information the other might not have.

Bundle for Savings

Have a home? Need renters insurance? Own more than one vehicle? Most insurance providers offer savings to customers who buy more than one policy from them. Add in one-payment billing, a combined deductible, and one person to answer all insurance questions, and it might seem like a no-brainer. But the old adage about putting all you eggs in one basket can apply to insurance products too: What's good for the car might not be good for the house. Review all policies thoroughly, and note any gaps in coverage (including laptops, which often require a special rider for both car and renters insurance policies).

Free Safety

Because insurance companies don't ever want to have to pay out a claim, many offer preventive education classes, online tools, and interactive sessions for policyholders on everything from disaster preparedness to smart cycling. Ameriprise, for example, offers safety tips on camping, fireworks, and grilling.

Match Games

 

Before switching insurance providers, contact your current insurer for a policy review, and explain that you're considering moving elsewhere for a policy with lower premiums. Sometimes an agent can offer a better rate almost immediately, especially if they know a valued customer is about to walk.

But a policy is more than just its premiums. Many providers, including Nationwide, Liberty Mutual, and Progressive (PGR), offer accident forgiveness. Some providers offer discounted rates for recurring customers in good standing. Others offer loyalty perks. If an agent can't match premiums, he or she might be able to add features to the existing policy.

Before You Sign on the Dotted Line

To avoid having to switch again in six months or a year, customers should ask their new provider, either in person, via an online chat, or over the phone, to walk through the policy step by step. You don't want to learn after an accident that something you thought was covered isn't. Many car insurance policies also cover drivers while they're riding their bicycles. Even weekend or casual cyclists should pay attention to the fine print covering two wheels.

Items in the Rear-View Mirror...

It's easy to view car insurance as simply a line item on a budget -- until you need to collect. Deductibles, service, and how quickly and how well the car is repaired after an accident are important factors to consider before buying any insurance policy.

Unfortunately, it's impossible to truly know how good a value any insurance product is until making a claim on it. Only then will those discounted premiums prove to have been either an excellent investment or an avoidable calamity.




                                   the source :http://www.dailyfinance.com/tag/car+insurance/

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Got a Traffic Ticket? The Bump to Your Car Insurance May Not Be So Bad

Worried about what will happen to your car insurance premiums after you get caught committing a minor traffic violation? If you aren't getting traffic tickets frequently, then the results of a new study by InsuranceQuotes.com -- owned by Bankrate.com (RATE) -- may ease your mind.

According to the study, in which drivers answered questions about their histories and premiums, most drivers, regardless of age, aren't paying more for car insurance after getting a traffic ticket.

• Only 31 percent of Americans who received a traffic ticket in the past five years saw their rates go up as a direct result. Of those 31 percent, most paid less than $100 more a year.
• Younger drivers, ages 18 to 29, were more likely to have a higher increase after a ticket, and 41 percent said they paid more as a result of a violation.
• 32 percent of 30-to-49-year-olds and 15 percent of drivers over the age of 50 also paid a slight increase.

However, drivers with a history of repeated violations, or significant violations -- including driving under the influence, leaving the scene of an accident, and reckless driving -- almost always were charged higher premiums.

The nonprofit Insurance Information Institute says increases in insurance premiums will depend on the type of moving violation.

For example, going fewer than five miles an hour over the speed limit is considered a minor violation, and could result in a 5 percent to 10 percent premium increase. Going more than 30 miles an hour over the limit, or committing reckless driving offenses like passing illegally, failing to stop, and tailgating can lead to premium increases of up to 15 percent. Just how much will depend on the state the insurance policy was issued in, the driver's record, and the insurance carrier.

Steer clear of Future Increases

Drivers with one minor moving violation can work to ensure their premiums don't go up by avoiding a second ticket, attending traffic safety courses, and keeping all registrations and inspections up to date.

Also, some states have forgiveness rules. In New Jersey, for instance, carriers aren't allowed to raise rates for the first two-point speeding ticket (in most cases). And some insurers will forgive a minor violation for drivers with an otherwise clean driving history. Allied Insurance forgives one minor violation every three years without a rate increase, for instance. Nationwide offers an optional Minor Violation Forgiveness policy. Liberty Mutual and Progressive also offer customers similar options.

The Massachusetts Office of Consumer Affairs and Business Regulation offers a guide to accident forgiveness that can be useful for drivers nationwide.

All drivers, regardless of the number of accidents they've been in, can save money on car insurance by bundling policies, comparing rates regularly, and asking their existing provider for loyalty discounts and other price reductions they might qualify for.

Motley Fool contributor Molly McCluskey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days. You can follow Molly on Twitter @MollyEMcCluskey.


                    the source :http://www.dailyfinance.com/tag/car+insurance/

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Everyone Gets an 'F' in Car Insurance 101

Think you know your car insurance coverage inside and out? You're probably fooling yourself. According to a recent survey by Insurance.com, consumers who said they had an "excellent" understanding of their policy actually scored the lowest when quizzed about their car coverage with an average score of 26 percent.

Not that the less-confident among us are doing that much better.

When divided into subgroups by age, gender, geographical region, or self-described expertise, no group scored higher than 39 percent on the Insurance.com quiz. Across all test takers, the average score of 32 percent earned the equivalent of an "F" for everyone.

Those weren't essay questions they had to answer, either: We're talking about 10 multiple-choice questions here.

Slicing and Dicing the Results

There were 500 drivers who answered the 10 multiple-choice questions.

So who scored the best on the quiz overall? It certainly wasn't those who said they read their entire policy. They actually scored a quite low 28 percent, on average.

The people who nailed the quiz -- relatively speaking, with a still unimpressive average of 35 percent -- were those who said they had never read their policy at all.

Here's how results shook out based on gender, age and geography:

• The average score for women was 35 percent, compared to an average of 27 percent for men.
• Drivers ages 40 to 70 scored the highest, at an average of 39 percent, compared to young drivers age 18 to 29, who only got 24 percent of the answers correct.
• Drivers in the South scored highest with an average of 34 percent. Drivers in the Northeast scored the lowest with an average of 29 percent, while those in the West scored 32 percent and drivers in the Midwest averaged 31 percent.

Test Yourself

Just two percent of test-takers got this one right:

"What does comprehensive coverage pay for?" (Select all that apply)

• Damage to my car if I crash it
• Damage to my car if an object falls on it, like a tree
• Damage to my car if I hit an animal, like a deer
• Damage to my car from a flood
• Property damage to others if I cause a crash
• Injuries to passengers in my own car
• Theft of my car

About half of those who took the quiz (55 percent) got this one:
"If your car is totaled, what does gap insurance pay for?" (Select One)

• The difference between the "actual cash value" of the vehicle and the amount owed on a car loan
• The difference between the "actual cash value" of the vehicle and the amount you paid for the car
• The difference between the amount owed on a car loan and the amount your paid for the car

More people (71 percent) knew the answer to:
"If a friend borrows your car and crashes it, whose insurance pays?" (Select One)

• Your friend's insurance
• Your own insurance

Curious to see how you'd fare? Take the test yourself here to see how your score compares.

                          the source :http://www.dailyfinance.com/tag/car+insurance/

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Reading This on IE or Safari? You're Likely Paying More for Car Insurance

On the surface, it might seem peculiar that your choice of Internet browser could affect the price you pay for car insurance. After all, browsers are merely tools for accessing the Web, and -- officially, at least -- they should all be accessing the same information. So the cost of the insurance policy that you find through Safari should be the same as the policy that you'd be offered on Google Chrome.

But here's the thing: a recent study by CoverHound, a company that helps users comparison shop for insurance, revealed that, among shoppers who bought auto insurance online, users of certain browsers paid as much as 23 percent more. According to CoverHound's analysis, the average user of Microsoft's (MSFT) Internet Explorer or Apple's (AAPL) Safari user pays $750 for car insurance every six months. By comparison, Chrome users pay $731 and Firefox users pay the least -- $608.

It would be great if using Firefox automatically resulted in lower insurance rates, but the truth is that there are other factors involved. To begin with, Firefox users skew older -- on average, three years older than Google (GOOG) Chrome or Safari users. And, since older drivers tend to get lower rates, it seems natural that Firefox users would pay less. They are also more likely to have graduate degrees, own their own homes, and be married.

But even if we control for the factors that naturally earn Firefox users lower rates, there are still anomalies that CoverHound's study reveals. For example, the average Internet Explorer user is older than the average Firefox user, which, based on industry standards, would suggest that IE users should pay less. Instead, they pay the most.

Users of Google Chrome are an even bigger anomaly. Chrome users are, on average, the youngest. They are far less likely to own their own homes and are the second-least likely to be married. By all rights, they should probably be paying the most for car insurance -- but they aren't.

According to CoverHound CEO Basil Enan, one reason for this anomaly may lie in the users themselves. "People who take the time to seek out a better browser might also be inclined to seek out a better insurance policy," he explains. "Internet Explorer and Safari often come pre-loaded on PCs and Macs. For the most part, Firefox and Chrome users have to go out of their way to get it. This suggests that they might be more tech savvy."

Another element may be Google itself. "Google is a great search engine," Enan notes. "Perhaps it's better at leading users to more attractive insurance rates. It's difficult to speculate, and would be difficult to prove, but it might be a factor."

In other words, the quality of your search might have an impact on the your insurance rate -- and the best search comes from a browser that you choose for yourself.

                         the source :http://www.dailyfinance.com/tag/car+insurance/

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Want to Pay Twice as Much for Your Car Insurance? Have a Kid

It's no great secret that across the nation, insurance premiums are on the rise. Over the past five years, the cost of insuring a home against fire and other casualty has crept up about 10 percent a year -- every year. Health insurance increases, while they've been muted of late, still rose 4 percent this year.

But if you think those hikes are steep, get a load of this next one.

Congratulations! You're a Father! (Now Open Your Wallet)

Kids are expensive. If you're a parent, you know this already. If you're a parent of a kid who hasn't turned 16 just yet, you're on track to get another lesson in how expensive they can be. Because once your offspring passes the driver's test and receive a license to drive from the state, he's going to need to be insured -- and that will cost you an extra $2,000 a year, on average.

(By the way, if your kid is getting her driver's license, your wallet won't take quite as big a hit, girls being 25 percent less expensive to insure than boys on average. But it'll still be some serious coin.)

According to the National Highway Traffic Safety Administration, driving is a risky activity for teens. The are more prone to get into accidents -- about four times as likely as older, more experienced drivers, according to the Centers for Disease Control. And traffic accidents are the leading causes of death for Americans ages 16 to 19.

Between lives lost and property destroyed, this all makes insurance companies very wary of insuring teen drivers. And when they do agree to insure a teen, they make you pay through the nose.

According to a recent report posted on Bankrate.com's (RATE) InsuranceQuotes.com, across both genders, all age categories, and all 50 states, parents pay an average 84 percent more for their car insurance after adding a teen to their policy.

Stay Between the (State) Lines

Think that's bad? It might get worse.

Unless you're fortunate enough to live in a state like North Carolina or Hawaii, where legislators have passed laws that ban setting insurance rates based on factors such as age or gender, your rates may rise by more than the average 84 percent.

How much more? Take a look at the top 10 states hiking rates on teenage drivers by 100 percent and higher:

• New Hampshire: 100.56 percent
• Louisiana: 100.58 percent
• Arizona: 103.65 percent
• Washington: 104.66 percent
• Maine: 105.23 percent
• Idaho: 106.74 percent
• Alabama: 110.61 percent
• Wyoming: 112.11 percent
• Utah: 114.62 percent
• Arkansas: 116.34 percent

That's right. Put a teenage driver on your policy in any one of these states, and you can expect to see your insurance cost for the whole family more than double.

The news is even worse for parents in Louisiana. Although its teen drivers bring "only" the ninth highest rate hikes with them when they join a policy, Louisiana car insurance in general is already the most expensive in the land -- averaging $2,699 annually for a single male driver, according to Insure.com. Add a kid to that policy, and you'll be shelling out upwards of $5,400 a year.

What's to Be Done?

Is there any way to beat the system, and avoid these hikes? Not entirely, no.

Sure, you could move to Hawaii, where insurance rates rise least. Then again, Hawaii also has the honor of hosting the nation's most expensive housing market -- so you'll end up seriously out of pocket, one way or the other. On the other hand, North Carolinian insurance rates don't rise so much when you put a teen on your policy. That market might be worth a look, if you're willing to move to save money.

Patience Is a Virtue... That Pays

One solution suggests itself from InsuranceQuotes.com's offhand observation that certain teens cost more to insure than others.

In particular, if you put a kid on your policy as soon as he hits 16, well, new 16-year-old drivers tend to double an insurance bill no matter where they live, averaging 99 percent rate hikes.

But premiums tend to rise less when teens wait a bit before trying to drive. 17-year-olds joining their parents' policies average a 90 percent increase. 18-year-olds cost 82 percent more. By the time Junior is age 19 and ready for college, the rate hike is "only" 65 percent.

Meanwhile, the standard caveats still apply: No one's forcing you to accept "average" rate hikes, so now that you know the "average" scenario, shop around to see if someone will offer you a better deal. Ask if taking (and passing) a safe driver course might reduce your teen's rate. And of course, since we're talking student-age kids here, make sure to inquire about discounts for good students. Whether or not it makes sense, insurance companies -- like grandparents -- often favor kids who bring home A's.

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