The economy may still be stuck in a recession, but that doesn’t seem to have any effect on the cost of living. The price of everything you need to run your household on a monthly basis continues to rise, from the gas you pump into your vehicle to the produce you pick through at the supermarket. That makes it incredibly important to find alternatives that save you money on those necessities, hopefully leaving you with a bit extra you can put aside for a rainy day. Insurance is one of these requirements, and people spend an awful lot of time and energy hunting down savings. Car insurance is a requirement in this country, but you don’t have to purchase the same sort of policy as you always have in the past. One interesting option is known as pay-as-you-drive, and many experts are touting this as a unique solution to an expensive problem. But will pay-as-you-drive auto insurance save you money?
Car insurance rates do not exist in a vacuum. It’s all based on a complex calculation derived from the user data of millions of drivers. Insurance companies work by making all of their decisions based on risk aversion. They want to determine a premium rate that insures they will make money off of you regardless of what happens in the future. When you request a policy rate, they don’t only look at your personal information, but at their entire data set for your region, your type of car, and the history of people in your gender, age and background range. Pay-as-you-drive insurance works differently, in that you are charged for your specific usage. They come up with a rate per mile, therefore asking you to pay for only the amount of driving you actually do. It works for the insurance provider because it offers people an incentive to drive less, therefore cutting down on the chance you’ll get in a car accident. And it works for the consumer, because they aren’t paying for the bad decisions of others.
Ask the insurance providers, and they’ll declare that this new approach will save consumers a ton of money. Progressive Insurance, one of the largest companies in the country went on record estimating pay-as-you-drive insurance will save the average customer $150 a year. But this won’t be the case for everyone. If you don’t do much driving during the week, you’ll probably fall into this savings group. But if you have a long commute which puts you at risk of a serious accident on a daily basis, you’ll most likely spend more for the same level of insurance.
In addition, you will have to give up a certain amount of your privacy to take advantage of this program. Most insurance companies place a device in your car in order to set their rate. They will track your usage for as much as six months, and their decision will be based to a certain extent not only on how much you drive, but when you drive as well. For example, if you frequently drive late at night they may not offer you pay-as-you-drive coverage at all, because their risk assessment shows that more accidents happen in the late night hours than at other times. You might not be comfortable giving your insurance company this detailed a view into your habits, in which case it won’t be worth any amount of savings. You might as well just find cheap car insurance in New Jersey and hope for the best.