Polished and gleaming, nestled in the safety of your garage, your car sits, waiting for the weekend getaway or the once-a-week trip to the grocery store. Are you one of the millions of Americans who drive much less than the national average? Perhaps you work from home or regularly take public transportation. Maybe you live in the city and the car is only used on rare occasions. Whatever the reason, if you fall into this category, you may be overpaying for car insurance.
Average Miles Driven Per Year
Based on recent statistics from the United States Department of Transportation Federal Highway Administration, the average American drives 13,476 miles per year. However, if you look at the dispersion by age, some age groups drive much more and some much less. For instance, people between the ages of 35 and 54 drive the most, averaging 15,291 miles per year compared to individuals over the age of 65, who average 7,646 miles per year. Gender variations are significant as well, with males driving on average more than 6,000 miles more than females.
Based on historic research auto insurance companies know that the more miles you spend on the road, the higher your chances are of being in an accident. While there’s something to be said for being a practiced driver (i.e. spending a lot of time behind the wheel), that is by far offset by the natural dangers of the nation’s public roadways. Other less-skilled drivers, adverse weather and unexpected activities all work to make driving a relatively dangerous activity. Even if you are the world’s best driver, you can’t control the actions of others and the more time you spend on the road, the more you expose yourself to these dangers.
When applying for a policy, insurance companies usually ask you to estimate the number of miles you drive in a year. They are trying to get a sense for the level of risk you expose yourself and since insurance companies are in the business of assuming risk, they need to figure out how much to charge you for the amount of risk you represent. Obviously if they can understand your driving habits, they can best estimate your risk profile.
Uaged-based Auto Insurance
With the introduction of “usage-based insurance”, which is also known as “pas as you drive” (“PAYD”) insurance, some of the best car insurance companies in the world have taken measuring your time on the road and your exposure to dangerous situations (such as driving above the speed limit) to the next level. At its most basic form, usage-based insurance directly relates the number of miles you drive into the amount you pay for car insurance. Companies may do this by providing you a monthly refund for driving less than the average or they may perform an annual review and reprice the next year’s policy to better align with your habits from the prior year.
Car insurance companies use digital devices to capture driver behavior.
More complicated PAYD insurance programs, aim to gather more exact information so that they can translate this into an overall risk profile adjustment. You may only drive 1,000 miles per year, but if each of those is spent on a dangerous stretch of highway, racing along at 100 miles-per-hour, the insurance company should be increasing your insurance rates not lowering them!
PAYD systems attempt to capture:
Average speed
Time of day
Distance travelled
Time travelled
Route taken
Recently, with the surge of mobile-phone related accidents, car insurance companies have taken steps to attempt to monitor phone-usage while driving.
Individuals who speed, drive long stretches without taking breaks or talk on their phones while driving will see a rise in their premiums. In contrast, drivers who follow the speed limit, seldom slam on the breaks and ignore their phones will receive a discount on their car insurance rates.
Telematic Car Insurance Systems
Some systems, referred to as “telematic” insurance, automatically communicates data to the insurance companies central system, which provides much more real-time feedback to both the insurance company and the driver (thereby having a much more immediate impact no your premium). These programs use devices that communicate data collected within the car to the car companies through radio-waves. Most programs take advantage of the same cellular communication service networks that provide service to your cellular phone. Because of this, availability may be limited to the area over which the insurance company’s cellular-service provider has coverage. With the promulgation of cellular networks, coverage is generally available to most Americans.
Some devices communicate driver data to insurance systems via radio.
While anyone who drives safer than their peers can benefit from these programs, the individuals who will benefit most are those who fall into a “high-risk” demographic category, such as young males. A teenager who drives considerably safer than their peer group may earn a significant discount on their car insurance rates by demonstrating to their insurer their safe driving habits. Others who stand to benefit significantly are drivers who commute using public transportation, people who work from home and eco-conscious individuals who avoid driving out of concern for the environment.
As with any large-scale system there are some negative side-effects. Some usage-based driving programs don’t differentiate between relatively low-risk travel (such as on low-speed, less traveled local road) and high-risk travel (such as a winding highway with no street lights). Some PAYD systems continuously collect your location using GPS, which may infringe on the driver’s privacy. These systems only capture certain high-risk elements, such as speeding. They don’t identify other risky behaviors, such as running red lights or failing to use a turn signal.
While not perfect, and still under development, drivers should consider whether they can benefit from adopting a usage-based or pay as you drive insurance program. Some of the best car insurance companies in the world are pioneers in these programs, including many of the partners we work with. Request car insurance quotes from multiple agencies using our free online service (enter your zip code and click on the “Get Quotes” button), then speak with the agents about their company’s specific program. Take advantage of the savings!
Polished and gleaming, nestled in the safety of your garage, your car sits, waiting for the weekend getaway or the once-a-week trip to the grocery store. Are you one of the millions of Americans who drive much less than the national average? Perhaps you work from home or regularly take public transportation. Maybe you live in the city and the car is only used on rare occasions. Whatever the reason, if you fall into this category, you may be overpaying for car insurance.
Average Miles Driven Per Year
Based on recent statistics from the United States Department of Transportation Federal Highway Administration, the average American drives 13,476 miles per year. However, if you look at the dispersion by age, some age groups drive much more and some much less. For instance, people between the ages of 35 and 54 drive the most, averaging 15,291 miles per year compared to individuals over the age of 65, who average 7,646 miles per year. Gender variations are significant as well, with males driving on average more than 6,000 miles more than females.
Based on historic research auto insurance companies know that the more miles you spend on the road, the higher your chances are of being in an accident. While there’s something to be said for being a practiced driver (i.e. spending a lot of time behind the wheel), that is by far offset by the natural dangers of the nation’s public roadways. Other less-skilled drivers, adverse weather and unexpected activities all work to make driving a relatively dangerous activity. Even if you are the world’s best driver, you can’t control the actions of others and the more time you spend on the road, the more you expose yourself to these dangers.
When applying for a policy, insurance companies usually ask you to estimate the number of miles you drive in a year. They are trying to get a sense for the level of risk you expose yourself and since insurance companies are in the business of assuming risk, they need to figure out how much to charge you for the amount of risk you represent. Obviously if they can understand your driving habits, they can best estimate your risk profile.
Uaged-based Auto Insurance
With the introduction of “usage-based insurance”, which is also known as “pas as you drive” (“PAYD”) insurance, some of the best car insurance companies in the world have taken measuring your time on the road and your exposure to dangerous situations (such as driving above the speed limit) to the next level. At its most basic form, usage-based insurance directly relates the number of miles you drive into the amount you pay for car insurance. Companies may do this by providing you a monthly refund for driving less than the average or they may perform an annual review and reprice the next year’s policy to better align with your habits from the prior year.
Car insurance companies use digital devices to capture driver behavior.
More complicated PAYD insurance programs, aim to gather more exact information so that they can translate this into an overall risk profile adjustment. You may only drive 1,000 miles per year, but if each of those is spent on a dangerous stretch of highway, racing along at 100 miles-per-hour, the insurance company should be increasing your insurance rates not lowering them!
PAYD systems attempt to capture:
Recently, with the surge of mobile-phone related accidents, car insurance companies have taken steps to attempt to monitor phone-usage while driving.
Individuals who speed, drive long stretches without taking breaks or talk on their phones while driving will see a rise in their premiums. In contrast, drivers who follow the speed limit, seldom slam on the breaks and ignore their phones will receive a discount on their car insurance rates.
Telematic Car Insurance Systems
Some systems, referred to as “telematic” insurance, automatically communicates data to the insurance companies central system, which provides much more real-time feedback to both the insurance company and the driver (thereby having a much more immediate impact no your premium). These programs use devices that communicate data collected within the car to the car companies through radio-waves. Most programs take advantage of the same cellular communication service networks that provide service to your cellular phone. Because of this, availability may be limited to the area over which the insurance company’s cellular-service provider has coverage. With the promulgation of cellular networks, coverage is generally available to most Americans.
Some devices communicate driver data to insurance systems via radio.
While anyone who drives safer than their peers can benefit from these programs, the individuals who will benefit most are those who fall into a “high-risk” demographic category, such as young males. A teenager who drives considerably safer than their peer group may earn a significant discount on their car insurance rates by demonstrating to their insurer their safe driving habits. Others who stand to benefit significantly are drivers who commute using public transportation, people who work from home and eco-conscious individuals who avoid driving out of concern for the environment.
As with any large-scale system there are some negative side-effects. Some usage-based driving programs don’t differentiate between relatively low-risk travel (such as on low-speed, less traveled local road) and high-risk travel (such as a winding highway with no street lights). Some PAYD systems continuously collect your location using GPS, which may infringe on the driver’s privacy. These systems only capture certain high-risk elements, such as speeding. They don’t identify other risky behaviors, such as running red lights or failing to use a turn signal.
While not perfect, and still under development, drivers should consider whether they can benefit from adopting a usage-based or pay as you drive insurance program. Some of the best car insurance companies in the world are pioneers in these programs, including many of the partners we work with. Request car insurance quotes from multiple agencies using our free online service (enter your zip code and click on the “Get Quotes” button), then speak with the agents about their company’s specific program. Take advantage of the savings!
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