Category Archives: car insurance

Use-Based Insurance Shifts Into High Gear

If you’re finally ready to think about pay-as-you-drive car insurance, it’s ready for you.

Over the past couple years, a majority of the country’s largest auto insurance carriers and many smaller ones have begun offering pay-as-you-drive and other forms of use-based insurance or have pilot projects in the works. During the same time, every state insurance regulator in the country has approved at least a handful of the policies, and some many more.

Auto insurers set rates for use-based insurance (UBI) by monitoring your mileage, driving speed or related activities through electronic devices or smartphones and apps connected to your car’s diagnostics port. That’s different from traditional policies, whose rates are based on actuarial studies of historical data on demographics and risk factors such as driving records.

First offered more than a decade ago, UBI policies today cover as many as 3 million U.S. cars and trucks, according to insurance industry analysts. Progressive, which sells more UBI policies than any other auto insurer, says its Snapshot plan accounts for 30 percent of customers who buy its policies directly. From 2012-’13, Snapshot premium revenue grew 50 percent, to $1.5 billion, according to the company.

Policies are expected to become even more popular in the near future. Within five years, 20 percent of all U.S. vehicle insurance is expected to incorporate some form of UBI, according to a January 2014 report from the National Association of Insurance Commissioners’ Center for Insurance Policy and Research. Forty-two percent of a representative sample of 1,046 U.S. drivers were “interested” or “very interested” in UBI plans, according to a February 2013 poll from market researcher Strategy Analytics.

“Marketing and discounts are two main reasons why it’s growing,” says Greg Basich, a senior analyst with Strategy Analytics’ automotive practice.

Roadblocks
UBI hasn’t fully arrived, however. While all signs point to more consumers giving the plans a spin, UBI policies still represent a tiny portion of the overall auto insurance market. Policies from Progressive, State Farm, Allstate, Esurance and others cover less than 2 percent of all vehicles on the road, according to industry watchers.

Privacy concerns are one of the biggest roadblocks. Drivers have been reluctant to let insurers place devices in their cars to track their mileage, says Michael Barry, a spokesman for the Insurance Information Institute, an industry group. Instances of credit card data breaches and government spy agencies monitoring cell phone communications have only added to people’s sensitivities about what might become of their personal data.

“Every person has a different degree of how much privacy they want,” says J. Robert Hunter, insurance director for the Consumer Federation of America. “Personally, I would want hard-braking data collected on me because I drive safely. But other people might not. Of course you have to trust [insurers] when they tell you what they’re collecting.”

Sharing Driving Info To Save
A major impetus pushing drivers to explore UBI is money. Specifically, they’re interested in the chance to save by paying based on how much (or little) they drive. Typical rates are predicated on people driving 12,000 miles a year. Prove you only drive 6,000 or 7,000 and you may be in line for a premium rate reduction, says Barry, the Insurance Information Institute spokesman.

At Progressive, the average Snapshot customer receives a discount of 10-15 percent, a savings of about $150 a year, says Dave Pratt, the company’s UBI general manager.

It’s not a given that UBI policies cause anyone to drive less. Instead, insurance company representatives and industry analysts believe people who already drive under the annual average are most apt to switch. “People who have bad driving records aren’t going to participate,” says Strategy Analytics’ Basich.

Telematics and Smartphones Ease the Way
The driving public’s growing comfort level with onboard telematics systems for GPS, entertainment, safety and maintenance may help ease the way for UBI policies, according to industry experts.

Pay-as-you-drive plans also are benefiting from consumers’ love affairs with smartphones and apps. First-generation UBI policies use pocket-size electronic meters plugged into a car’s diagnostics port to collect and store data or transmit it in real time back to the insurer through telematics such as OnStar or Ford’s Sync system. Newer offerings work with smartphone apps, sending the data to the insurer through Wifi connections. One of them is Drive Safe & Save with In-Drive, one of three UBI plans that State Farm offers.

Drivers in the market for UBI policies can research what’s available on insurers’ Web sites or by getting the data from state insurance regulators. States such as California strictly prohibit insurers from tracking anything but miles driven, while other states allow insurers to measure such activities as speed and braking. Some insurers offer introductory discounts on UBI plans to drivers who aren’t already customers, adjusting them accordingly after a trial period.

Tips To Cut Teen Insurance Rates

Teens ages 16-19 are three times more likely than drivers older than 20 to be involved in a fatal crash (or any crash, for that matter) according to the Insurance Institute for Highway Safety. It’s not too surprising, then, that teen drivers tend to have high insurance premiums. For parents, this can mean a big jump in insurance premiums once you add your teen driver to your policy. However, there are ways to reduce your costs right out of the gate, even for very inexperienced drivers. Here are some ways to keep policy costs at a minimum.

Choose the Right Car
It’s simply a matter of economics. There are some cars that cost more to repair and replace than others. There are also some cars that are more likely to be stolen and others that protect passengers better in a crash. Combined, these three characteristics have a lot to do with how much you’ll pay for the collision and theft portions of your policy, says David Goldstein, the author of Insure Your Car for Less: A Practical Guide to Saving Money on Automobile Insurance.

There are several ways to choose the least expensive car to drive. First, check the Insurance Institute for Highway Safety’s Top Safety Pick awards and the National Highway Traffic Safety Administration’s5-Star Safety Ratings to see which cars scored the best in crashworthiness. You’ll also want to check the National Insurance Crime Bureau’s list of Hot Wheels: cars that are most commonly stolen.

Your insurance broker or company can also help you find the best rate for the cars you’re considering, says Goldstein, who has worked as an insurance and claims adjuster. “If you’re considering several cars, call and ask for a rate quote on each,” he suggests.

Midsize family cars are generally the cheapest to insure, says Jeanne Salvatore, senior vice president and chief communications officer at the Insurance Information Institute, a nonprofit information service. “You want a car that’s easy to drive and highly protective. Those are the cars that are going to keep your teen safe and cost the least to insure,” she says.

You may also want to consider a car that doesn’t need collision insurance, which will cut your rates considerably, says Salvatore, and either way, the age of your car may lead to more discounts.

“Some companies offer a utility discount for cars older than a 2002 model year,” she says. That said, make sure any older car you purchase has a solid crash rating and all of the safety features that a newer car might have including airbags, an antilock braking system (ABS), daytime running lights and (for SUVs) electronic stability control.

Adjust Driver Assignments
When you call the insurance company to add your child to a policy, the representative will ask you to designate which car will be driven by each member of your family most often.

You can save money by designating and having your child drive the car that’s the least expensive to insure. The trick is finding out which car that is, says Goldstein. “Driver assignment can really affect your rates,” he agrees.

If you get someone on the phone who is willing to work with you, he or she can take you through all the different scenarios. “Occasionally, I’d quote rates for four people and four different cars: two parents and two kids. If we played around with it, we could often save money,” Goldstein says.

Look for Alumni Discounts or Resident-Student Discounts
One of the perks of going to college is that many schools ink alumni deals with large organizations, such as insurance companies. While the discount is usually around 5 or 10 percent, it’s still worth looking into. Geico, for instance, offers an 8 percent discount for DePaul University students and alumni. Liberty Mutual offers special rates to those who attend Arizona State University.

If your child goes away to college and doesn’t take a car along, you can save a lot on your premium. Allstate, for example, offers a 35 percent discount off premiums for students who live at a school that is more than 100 miles from where their car is garaged. “There’s an assumption that they are only going to be driving on weekends and school vacations,” says Salvatore.

Finally, all full-time high school and college students who get good grades can benefit from their diligence. Most companies offer up to 25 percent discounts for good report cards. You’ll also see rates drop as your child advances in school. Seniors in college have better rates than freshman, so if your child takes college credits over the summer or in high school, let your insurance company know when he or she reaches the next college milestone, says Goldstein.

Wait an Extra Year Before Licensing
Some teens may not like this idea, but you can save a lot of money simply by having your son or daughter wait an extra year to get a driving permit.

“Wait until they are as old as possible before they get their permit,” says Goldstein. “For instance, in some states you can get your learner’s permit as early as 16 but you’re probably not going to be driving [without restrictions] until you’re 18. Why pay for insurance those two years unless you have to?”

Delaying the process is more common than you may think, according to several recent studies. The AAA Foundation for Traffic Safety reports that just 44 percent of teens get their licenses within 12 months of the minimum age and only 54 percent get their licenses before they turn 18.

However, if you go this route, make sure teens know that they’ll still need the practice and supervision that a graduated driver licensing program affords.

Tracking for Discounts and Better Driving Habits
In recent years new devices that connect to a car’s computer and use GPS technology to track driving habits and routes have flooded the market. While they can be very useful for parents who want to make sure that their teen isn’t speeding or driving outside an approved area, they’re also being used by insurance companies to help set rates for drivers of all ages in an approach called use-based insurance.

Snapshot, a program by Progressive Insurance, is one such option that uses a pocket-size telematics device that transmits car data using cell-phone technology. The device plugs into a car’s onboard diagnostic port and measures driving habits such as how and when someone drives, tracking behaviors like mileage, time of day and if the person performs hard braking maneuvers.

“Our Snapshot program gives all consumers, including teens, more control over their car insurance costs by offering personalized discounts based on their actual driving behavior,” explains Jeff Sibel, a spokesman for Progressive Insurance. “People who drive less, in safer ways and during safer times of day are most likely to receive a discount.”

Some companies are offering the device for parental tracking, but without an immediate insurance discount. Its use could result in lower rates going forward, says Rebecca Hirsch, a spokeswoman for insurer USAA. “We’re offering the device for free and parents get the monitoring for a year free,” she says. “Parents can get text messages if their teens are doing things like hard braking. It enables the parent and the teen to have a conversation around safe driving habits. The first few years are so critical. Anecdotally, we’ve seen that the devices help build better driving behaviors.”

Take a Class
Adults and teens alike can save money by taking a six-hour driving safety course either online or in person. Some insurance companies are offering teen-specific courses that can help reduce the number of crashes that involve teens by providing realistic driving simulations.

Liberty Mutual, for example, offers something it calls teenSMART, a program that focuses on the six factors that most commonly cause teen car accidents. The company says teens who complete the program may get “special savings” on their auto policies, but doesn’t offer any examples of what those savings might be.

State Farm offers a program called Steer Clear for drivers under the age of 25 or new drivers with less than three years of driving experience. It requires drivers to watch a video, sign a safe driving parent/driver agreement and complete a certain number of supervised trips of 15-30 minutes over the course of a month, filling out a log after each trip. By completing the program, drivers can get a discount of up to 15 percent on their coverage, says State Farm spokeswoman Rachael Risinger.

Finally, driver-training classes — so-called driver’s ed — can also help lower your premiums by up to 10 percent, depending on your insurer.

Make Smart Choices
Even if they apply every discount imaginable, most people will find there’s no getting around the fact that rates will go up with a teen driver on the policy — at least for a little while. And while it might be tempting to simply “forget” to inform your insurance company that Junior has his license, take note: Doing so can have serious consequences if your child is in an accident.

You’ll also want to make sure you have enough insurance coverage. “Don’t go for the minimum limits,” suggests Burl Daniel, a former insurance agent and corporate risk manager who testifies as an expert witness in insurance cases. “You’re exposing yourself to potential problems, if your kid does have a wreck and seriously injures someone. Don’t take the bait now just to save a few hundred dollars when it could end up costing you a lot down the road.”

How To Shop for Use-Based Car Insurance

In recent years, nine of 10 top U.S. auto insurance companies have started selling policies based on how motorists drive. At least a handful of pay-as-you-drive policies are offered in every state, covering as many as 3 million U.S. vehicles, according to industry estimates. Switching to use-based insurance (UBI) could help you save a little or a lot over what car owners spend on premiums associated with a more traditional policy.

If you’re considering changing to a UBI plan, it pays to understand what you’re getting.

Carriers set UBI rates by collecting mileage or other information directly from your car, but similarities among policies end there. Some insurers use a small, meterlike electronic device that plugs into a car’s onboard diagnostics port to store or transmit information. Newer versions gather driving data through an app and a smartphone connected to a car’s infotainment or telematics system.

Drivers may happily trade access to their driving habits for lower insurance rates. But privacy advocates worry that insurance companies aren’t always 100 percent transparent about what data they collect, what they do with it and with whom they share it.

“Privacy is a real question,” says J. Robert Hunter, insurance director for the Consumer Federation of America. “What do insurance companies do with that information? If I park at the corner of Main and 14th and on one corner is a bar and another is a gym, will you raise or lower my rate?”

Here are steps to take if you’re shopping for car insurance and considering a use-based policy:

Find out what’s available: Look on the Web site of your state insurance commission or consumer advocacy agency to see which insurance carriers are licensed to operate in your area. Here’s a list ofall 50 state insurance departments. Alternatively, visit auto insurers’ Web sites and type in your ZIP code to see if they sell UBI plans where you live.

Understand what types of data insurers collect: Some states restrict the information insurers can collect, which limits the types of UBI policies they offer. In California, for example, insurance companies can track mileage but are barred from monitoring where or when you drive. They also can’t track such behaviors as how fast you drive or how often you slam on the brakes, the activity known in insurance lingo as “hard-braking events.” Visit state insurance regulators’ Web sites for their explanations of the UBI plans they authorize, such as this pay-as-you-go auto insurance pamphletfrom the Oregon Department of Consumer and Business Services. You can also read the fine print on UBI policies on insurers’ Web sites to determine what driving data an insurer collects, and how it is gathered.

Try before you buy: Certain insurers give potential customers a chance to take a UBI policy for a test-drive before committing to a policy. In such cases, you may be asked to plug an electronic monitor into your car’s diagnostics port for a month or so, which allows the insurer to collect enough data to set a rate. Other insurers offer UBI policies only to existing customers.

Understand how insurers determine discounts: Insurers may offer an introductory discount of 5 or 10 percent during a try-out period, and adjust the rate as needed after monitoring mileage or driving behaviors for a set time period. Progressive Insurance bases rates for its Snapshot policy on six months of driving data. State Farm customers with Drive Safe & Save policies keep electronic monitors plugged into their cars all the time, so, theoretically, their rates could change at renewal time, if they’ve driven substantially more or less than in the previous period.

Consider a UBI bundle: Some insurers offer UBI as part of a bundle of services tied to a car’s built-in entertainment, safety or maintenance systems. State Farm’s Drive Safe & Save with In-Drive Connectpolicy, a joint venture with Verizon Wireless, offers mileage-based insurance along with stolen vehicle assistance and hands-free mobile phone service. After a one-year free trial, charges for In-Drive Connect jump to $6.99 a month or more based on what other features a customer chooses.

See how you’re doing: If you sign up, use the Web portal associated with your UBI policy to monitor your driving. Some insurers’ dashboards give customers a grade based on their driving habits. For example, customers of Allstate’s Drivewise UBI policies can download an iPhone or Android app to look up mileage, speed, hard stops and what times of day they drive.

A Comprehensive Guide to the Best Car Insurance Purchase

The moment you buy a brand new car, you are on cloud nine. To buy a car is a great achievement indeed. You allot a budget; make a list of your requirements and shortlist cars in accordance with that. You go for the test drive(s) and finalize the car that met your expectations.

After purchasing a car, some people follow this tradition. They go the preferred place of worship to seek the blessings of the almighty. The priest performs a ritual. In Hinduism, they place a lemon under each tyre and run the car over it, as it is considered as a good omen.

In India, it is mandatory to buy an automobile insurance too. So, you have to have car insurance. Before you buy motor insurance, here are the things that you should keep in your mind.

Types of Motor Insurance

There are two types of automobile insurance plans offered by insurers.

  1. Liability Only – The first one is a liability-only policy. The government has made it compulsory for all the vehicles to have this policy at the very least. This policy provides the coverage against legal liabilities that may arise due to injuries, death or property damage of a victim (a third party).
  2. Comprehensive Motor Insurance – The second type of insurance policy is Comprehensive Motor Insurance. It provides coverage for own-vehicle damage as well as for third-party liability. It also covers damages related to manmade tragedies, such as riots, thefts, vandalism, malicious activities, terrorist activities etc. In addition to that, it covers damages caused by natural disasters like floods, earthquake, landslides, storm etc.

As third-party insurance is compulsory in India, it is a wise decision to opt for a comprehensive motor insurance, as it provides an adequate coverage. When it comes to buying insurance, never be underinsured.

Imagine this scenario – after parking your car, you went into a restaurant. When you came back, you noticed that there is a dent on your car. It broke your heart a little when you saw that. When you went to the mechanic to get the dent fixed, the repairing cost broke your heart a little more.

The bottom line is, when you have comprehensive motor insurance, you are safeguarded against these expenditures.

The following are the factors that you should consider before buying car insurance.

  1. Daily Allowance – When your car is under repair, you get money by your insurer for hiring another mode of commuting.
  2. Lock/ Lost Key Replacement Cover – You get the cover to replace your car keys if you lost them or it is stolen. Also, you get cover for lock replacement if your car was broken into.
  3. Stay at a Hotel – If your car has become immobile because of an accident, you are entitled to get a hotel stay on your insurance provider’s behalf.
  4. Invoice Cover Return – There is a difference between ‘claim amount receivable’ and ‘purchase price of vehicle’ under the coverage when there is a loss because of some accident. When this happens, the rider bears the difference amount from his pocket.
  5. No Claim Bonus – When you don’t file a claim, you receive no claim bonus (NCB). To get that bonus, some people don’t file a claim, as they don’t want to miss out on NCB. If you just make one claim during the policy tenure, you retain the existing NCB. In this way, your no claim bonus is safeguarded.
  6. Depreciation of Reimbursement Cover – This is add-on feature that offers full claim without any deduction as depreciation on the cost of replaced parts.
  7. Repair of glass, rubber, plastic and fiber parts – In the case of damaged glass, rubber, plastic and fiber parts, you can get them repaired without affecting your No Claim Bonus.
  8. Lost Personal Belongings and Baggage Cover – You get coverage by your car insurance company if you don’t have any anti-theft device that is approved by the ARAI (Automobile Research Association of India).

Tips to File Small Car Insurance Claims

The future is unpredictable. It is better to hope for the best and prepare yourself for the worst. For sure, we can’t change the future. We can make efforts from our end to ensure that nothing goes wrong.

Road accidents happen across the globe. You read about it in the newspaper, you watch it on the news, and you even listen to it on the radio. Whenever you come across road accident-related news, you feel bad for the person(s) who became victimized because of their misfortune.

When Mr. Kumar bought a brand new Ford, he was ecstatic for obvious reasons. He bought comprehensive car insurance to safeguard his car. After 3 months, his car met with an accident. He was safe but the car was severely damaged. He was a little disheartened to see his car in that condition but he was grateful to the almighty that nothing happened to him. Also, he was comforted that he has a comprehensive insurance cover for his car so he won’t have to bear the repair cost from his own pocket.

After a discussion with his office friends regarding the claim, he was in a state of confusion. He wasn’t pleased by the outcome of the discussion as he was suggested to bear expenses from his own pocket. The damages were not severe; he was advised not to file for the claim because the repair cost was not that much.

As an insured person, Mr. Kumar had second thoughts about it. He had all the rights to file the claim. After all, that was one of the major reasons that he bought the automobile insurance in the first place. He was tensed about the drawbacks of filing the claim and its consequences.

Mr. Kumar was not alone who faced this dilemma. Most of the people feel just like him when it comes to file a small claim. Is it worth it to file a small claim? Read on to find out.

When it comes to filing small claims, it is all about calculations. Calculate the cost that you would have to pay and compare it with NCB that you will get if you don’t file for the claim. On the basis of the comparison, decide whether it is a smart move to file the claim or not.

Deductible Expenses

The amount for deductible expenses is specified at the time of buying a policy. It is a portion of the claim amount that the policyholder has to bear from his own pocket. When it comes to file a claim, the deductible expenses, depreciation etc. is subtracted from the total amount and then the remaining balance is payable.

It is not that necessary to file a claim that sums up more or less, close to the deductible expenses.

Your NCB Is Affected

No claim bonus is a bonus referred as a discount that is given to the policyholder by the insurer at the time of renewal of the policy if no claim has been filed. The NCB is set as 20 percent initially and it hikes consistently if you don’t file any claim. In case only one claim is filed, the NCB becomes zero. This is the reason why you should refrain from filing a small claim.

For instance, your car insurance policy’s deductible is Rs. 2000 and the NCB discount is Rs. 6000. If you file a claim of Rs. 4000; you will have to pay your share of Rs. 2000. At the same time, your NCB of Rs. 6000 will slip away from your hands.

Financially speaking, small claims are avoided because you end up losing your money. Even in this particular scenario, your will get a claim worth Rs. 4000 at the same time; you will lose Rs. 2000 since your NCB is Rs. 6000.  Make a claim only when the claim amount is large. In that case, what you spend will be more than what you will get. That justifies having a car insurance coverage.

Complete Guide to Select the Best Car Insurance Plan

Before zeroing down an insurance policy for their car(s), most people miss the crucial step of researching, and they jumping to the premium directly. On the basis of the premium, they finalize their selection of a car insurance policy.

Here is a step by step guide for you; it will be helpful for you in order to make an informed and wise choice. Consider the points mentioned below in order to select the best insurance policy for your car.

1. Compare the key feature provided by the insurance coverage

Draw a comparison of your shortlisted motor insurance policies to analyze if they all are providing the same kind of insurance cover. Your insurance plan should include all the key inclusions in terms of a car (such as own damage cover) and provide you with coverage against a personal accident as well as for the injuries succumbed by a thirdparty.

2. Review Add-on Riders as the Part of the Car Insurance Policy

It is always recommended to pay adequate attention to all the add-on riders so that you can pick out the ones that you want as the additional benefits. For your convenience, we have listed below a few crucial motor Insurance riders.

  1. Engine Cover – It provides an extra layer of protection by safeguarding you against additional expense incurred due to car engine damage.
  2. Third-Party Liability Coverage – Third-party Liability coverage ensures the protection of the car owner against any financial liability that could be because of any bodily injury, death, and damage repair cost of a third-party motor.
  3. Roadside Assistance Cover – In case you are stranded because of the engine failure or any accident or if your car’s tire is punctured, you are provided with the option of availing roadside assistance. It will enable you to call your insurer and make a request to send a car mechanic at your location.
  4. Zero Depreciation Cover – When you make a selection to add zero depreciation cover to your car insurance policy, the depreciation on substituted car parts is waived off by your insurance company. It signifies that you are eligible for getting a higher amount of claim.
  5.  Personal Accidental Cover – Personal accidental coverage ensures the financial protection to the vehicle owner against unexpected and unfortunate events that might induce physical trauma, or cause the accidental death, or the person might end up being a totally disabled permanently because of a road accident.

3. Consider Reviews of the Car Insurers

Make sure you ask your extended family members and friends regarding their experiences with any specific motor insurance company. The feedback coming directly from your near and dear ones may provide you better insights about how its customer support and claim procedure work. It will help you to make an informed choice.

4. Compare Insurance Premium Online

The Internet is flooded with so-called great deals. Don’t fall for them; they could be nothing but a trap. You can come across a decent deal online when you take some time out of your hectic schedule and search across the Internet.

While comparing car insurance plans online, keep the following points in your mind:

  1. Compare various insurance plans offered by the different insurance providers.
  2. Ensure that the comparison site computes the premium on the fixed IDV (Insured Declared Value).
  3. Compare the insurance premium on at least 3 online insurance comparison sites.

5. Negotiation is the Key

When it comes to buying motor insurance, negotiate with your existing insurance provider.You never knowyou might end up getting an additional advantage if you have been a responsible driver and have not made way too many claims or filed too many accidents.

6. Safeguard Your NCB

If you are a responsible driver, and you haven’t filed any claim, then you get the advantage of No Claim Bonus (NCB). If you don’t register any insurance claim for a year, then your car insurer rewards you with No Claim Bonus. This is the discount that is subtracted from your insurance premium during policy renewal. As an option, you can go for NCB.

7. Checkout the CSR

Before you finalize a car insurer, last but not the least, consider the insurer’s previous record of claim settlement. Claim Settlement Ratio is the time taken by an insurer to settle down the claimsfromits clients. Proceed only when it is good. Don’t even think of buying car insurance policy if the CSR is not good. You can easily find the Claim Settlement Ratio of various insurers on the website of IRDA of India.

How To Tell If Usage-Based Car Insurance Is Right for You

Plug-in devices that monitor aspects of an auto insurance customer’s driving are nothing new. And it’s nearly impossible to miss the commercials touting the savings that good drivers might enjoy if they try out their carrier’s usage-based programs.

But what is still only whispered about are the potential downsides: surcharges for bad driving. Most auto insurers go out of their way to insist that their driver-monitoring programs exist only to reward safe drivers and that the worst outcome for trying one is that drivers don’t get the advertised savings. And even then, insurers say, drivers will gain valuable feedback and be able to make positive changes in their driving.

But in spring 2015, Progressive announced that it would begin charging some members of its Snapshot program a surcharge for aggressive driving behaviors.

Dave Pratt, Progressive’s usage-based insurance business leader, said Snapshot 3.0 currently exists in Missouri, Indiana, Iowa, Nebraska, Texas, Utah, Wisconsin, Illinois, Ohio and Oregon.

“Because insurance is regulated at the state level, the full rollout will take time and vary based on the Department of Insurance in each state,” Pratt said.

As of now, Progressive is the only major insurance carrier moving away from the reward-only model of usage-based insurance programs, which are all still voluntary. Progressive explains that the surcharges will help them give good drivers even lower rates.

Other major insurers continue to insist that the usage-based programs will only reward good drivers and will not punish bad drivers. Justin Herndon, an Allstate spokesman, said that adding a surcharge is not something the company has considered for its smartphone-based Drivewise program. Nationwide Insurance has no plans to impose a surcharge on members who enroll in its program, said company spokeswoman Alison H. Emery.

Assessing Driving Habits
We all want to believe we are good, safe, conscientious drivers and that usage-based insurance would only benefit us. However, with the potential for surcharges now in play, drivers must be able to carefully assess their driving before signing up. Though very few members of these programs are currently subject to potential surcharges, Progressive’s change seems to foreshadow more changes to come.

J. Robert Hunter, director of insurance for the Consumer Federation of America, said he believes that within four to six years, usage-based insurance will be the norm, and any driver who opts out will pay more. Robert P. Hartwig, president of the Insurance Information Institute, agrees.

“Most vehicles in the not-too-distant future will be manufactured with advanced data recording technology devices,” Hartwig said, although he believes opting out will still be an option.

Major auto insurers with usage-based programs include Progressive’s Snapshot, Allstate’s Drivewise,State Farm’s Drive Safe & Save, National General Insurance’s Low Mileage Discount, Nationwide Insurance’s SmartRide and Metromile. All offer general information about what kinds of driving behaviors are likely to earn customers a discount. While no company would offer precise details about how discounts and surcharges are calculated, most made it clear that they look at the whole picture of a driver’s behavior behind the wheel over a period of time.

Below is a checklist to help drivers determine if a monitoring device might be a good financial decision for them. It’s a good idea to use this checklist for at least a week and be honest, especially with regards to hard braking, which seems to be one of the biggest factors in how rates are calculated. The Insurance Information Institute’s Hartwig explained why:

“Frequent hard braking suggests that the driver is consistently driving in a manner that is inappropriate or at a speed that is excessive relative to prevailing driving conditions, thus increasing the likelihood of an accident,” he said.

For best results, keep this checklist in your car and makes notes at the end of each trip.

Driving Assessment Checklist:

  • Times driven between the hours of 12 a.m. and 5 a.m.
  • Hard braking (decreases in speed of 7 mph per second or greater)
  • Quick accelerations (increases in speed of 9 mph per second or greater)
  • Speeds exceeding 80 mph
  • Total mileage

Once you’ve tracked your behaviors for at least a week, take a careful look. It will be easy to see if you’ve exceeded the mileage limits. If you drive fewer than 12,000 miles a year (about 230 miles a week), you will likely get some savings. For most companies, exceeding 15,000 miles a year (280 miles a week) won’t lead to any savings. It could lead to surcharges for Snapshot 3.0 customers.

Keeping speeds under 80 mph is also a simple task. However, David Bakke of Money Crashers, emphasized that if you have recent speeding tickets, that could be reason enough to decide that usage-based insurance isn’t a good choice for you.

If you drive in the early morning hours, you’re unlikely to be a candidate for savings in a usage-based plan. That’s because data from the National Highway Traffic Safety Administration and Allstate’s own data shows 12 a.m. to 5 a.m. to be the most dangerous time to be on the road. Driving then creates the highest risk of a customer filing an insurance claim. Allstate’s Justin Herndon said the company doesn’t make exceptions for people who have to drive during these hours: shift workers, for example.

While most insurers indicated that aiming for zero incidences of hard braking is the best bet for savings, they know that perfection isn’t always possible.

“Progressive recognizes that there are occasions in which a driver must brake hard to be safe,” Pratt said. That’s a sentiment echoed by other auto insurers with usage-based programs.

Is Tracking Good for Consumers?
The Consumer Federation of America likes the idea of risk-based pricing, Hunter said. The tracking of driver behavior “should signal to people to drive more carefully, which is what insurance pricing is supposed to do. We hope this signals a move away from socioeconomic pricing (charging more for drivers with less education, lower-paying jobs, not owning a home, bad credit, etc.).”

But Hunter urged consumers to demand absolute transparency about what the companies are monitoring and what they’re doing with the data. He cites as cause for concern Allstate’s recent patenton a blood-pressure-monitoring steering wheel and statements by the company’s CEO that Allstate will consider selling customer information to corporations. Allstate insists that selling data will help customers save more money and that the company honors “customer control over the distribution of their personal information.”

Hartwig said that the monitoring of driving behavior also could improve road safety overall.

“The feedback customers receive based on their driving behavior provides customers with a unique opportunity to modify their behaviors,” he said. “By reducing or eliminating those behaviors that elevate risk, consumers will not only reduce their insurance premiums but will also benefit because they will be less likely to be injured in an accident. They’re also less likely to injure others or damage the vehicles or property of others.”

Tips to Save Money on Car Insurance

 There is a very good chance that you are — this very moment — paying too much for your car insurance. There is an even better chance that you could get a better rate, from another insurance company, than you could from your existing insurer.

So why not take an hour or so and review your policy for potential savings? Or, if you’re fed up with the high insurance rates from your current insurer, shop around for a new company.

The Internet has created increasing competition between car insurance companies. It is easier than ever for consumers to shop for low insurance rates, to analyze coverage and compare premiums. Still, studies have shown that people don’t shop around for insurance in the same way they might shop for a new car. Also, people tend to stay with the same car insurance company for years. Why not prove these studies wrong? Put the power of the Net to work for you and save money in the process.

You can save on auto insurance in five ways:

  1. Make sure you get all discounts you qualify for
  2. Keep your driver’s record clean and up-to-date
  3. Adjust your coverage to assume more risk
  4. Drive a “low profile” car equipped with certain money-saving safety features
  5. Shop around for a good, low cost insurance provider

First, let’s look at the discounts you might qualify for. Discounts fall into a number of categories:

  • Low-risk occupations
  • Professional organizations
  • Combined coverage
  • Discounts for safety features
  • More risk assumed by driver
  • Discounts for senior citizens

Low-Risk Occupations

Insurance is a numbers game. Adjustors collect information about what types of people get into accidents. Over the years they see a trend. Drivers that work as engineers tend to get into fewer accidents. Why? It would be fun to speculate about the reasons (pocket protectors — need we say more?) but the insurance companies don’t really care about that. All they know is that, in fact, engineers are a low risk. Since there is less chance that they will wrap their cars around the trunk of a horse chestnut tree, they charge engineers less for insurance. Simple.

But you say you are a teacher instead of an engineer? You might still be in luck. There may be discounts for teachers. You never know unless you ask — and unless you shop around. Not all insurance companies are the same.

Professional Organizations and Auto Clubs

Have you ever been about to pay $100 for a hotel room, only to discover that a AAA discount saves you 15 percent? Now you’re paying $85 and feeling proud of yourself. It’s similar in the insurance business. Affiliation with AAA — and certain other professional organizations — will lower your rates. You should check with your employer to see if there are any group insurance rates. At the same time try checking directly with the insurance company representative when you inquire about the cost of policies.

Combined and Renewal Discounts

A big source of savings is to insure your cars with the same company that insures your house. Make sure you ask if combined coverage is available. This will lower your payments on your car insurance and make your homeowner’s policy cheaper too.

It’s also important to make sure you are getting a “renewal” discount that many car insurance companies offer. This is a discount given to people who have been with the same insurance company for an extended period of time. If you have carried insurance with a company for several years, and not had an accident, your insurance company likes you. Think about it. You paid them a lot of money and they didn’t have to do anything except send you bills and cash your checks. True, they were ready to do something if you got in an accident. But you didn’t get into an accident so they’re happy and want to continue their relationship with you. A renewal discount is a good incentive to urge you to return. And it’s a good reason for you to stay with them.

Discounts for Auto Safety Features

Auto safety features will also lower your payments. Heading the list of money saving safety features is antilock brakes. Certain states — such as Florida, New Jersey and New York — encourage drivers to buy cars with antilock brakes by requiring insurers to give discounts. Check to see if you live in such a state, or if the insurance company you are considering gives a discount for this feature. Automatic seatbelts and airbags are also frequently rewarded with insurance discounts.

Assume More Risk

Two powerful ways to bring your coverage down is to assume a higher risk. This is done in two ways. The most dramatic reduction can be realized by dropping your collision insurance on an older car. If the car is worth less than $2,000, you’ll probably spend more insuring it than it is worth. The whole idea of driving an older car is to save money, so why not get what is coming to you?

Another way to redesign your policy — and save money in the process — is to ask for a higher deductible. The deductible is the amount of money you have to pay before your insurance company begins paying the rest. In other words, you pay for the little dings and bumps and let your insurance company pay for the heavy hits.

For example, a common deductible amount is $500. This means if an accident you’re in causes $1,500 worth of damage, you pay $500 and the insurance company pays $1,000. You could, however, set your deductible to $1,000. This still covers you against heavy losses, but it may decrease your monthly premium by as much as 30 percent.

As a final note, if you are being strangled by high insurance costs, keep this in mind when you go car shopping next time. The more expensive and higher-performance the car is, the higher the premium will be. This is particularly true of cars that are frequently stolen, or are expensive to repair. The insurance company keeps this in mind when setting its insurance rates for this vehicle. Shop for a low-profile car and get your kicks in other ways. You’ll love the savings you’ll see on your auto insurance.

Should You Get Credit Insurance When You Buy a Car?

 For most of us, buying a car is the second largest financial transaction we’ll make, next to buying a home. And we’re likely to get loans to finance our car purchase. In the fourth quarter of 2014, 84 percent of new cars purchased were financed, according to Experian Automotive.

If you’re financing your car purchase through a dealership, it’s also likely that the finance and insurance manager will offer you warranty and insurance products, such as an extended warranty, gap insurance or tire-and-wheel protection. The F&I manager might also offer credit protection, which is meant to cover your car payments should you be unable to pay them yourself because of layoff, injury, illness or death.

The most venerable of these products, with an almost 100-year history, is credit insurance. Consumer groups have long been leery of credit insurance products, which are offered not just for cars, but also for credit cards and other consumer loans. Often, the consumer groups contend, the products are expensive and unnecessary. Further, there have been instances of lenders forcing the credit insurance on consumers.

“It’s often very expensive when you compare it to the benefits,” says Chris Kukla, senior vice president with the Center for Responsible Lending, a nonpartisan, nonprofit organization focusing on consumer lending, based in Durham, North Carolina. Further, he says, the credit insurance policies are “riddled with exclusions.”

Payout rates (the premium dollars paid compared with the amount paid out in claims) are typically low. That’s because the money is going to commissions, he says.

There are some decent providers of credit insurance, such as credit unions, Kukla says, but it’s tough for consumers to know which products are worthwhile and which ones are rip-offs. To protect themselves, potential buyers should look for coverage they can afford that specifically addresses their financial concerns and which comes from a reputable insurer. The insurance department in your state is the place to check in order to see that the company is licensed and legitimate, says automotive expert Lauren Fix.

The three most common types of credit insurance coverage are:

Credit life: This pays off all or some of your loan if you die during the time you’re covered.
Credit disability: Pays on the loan if you become ill or injured and can’t work during the time you’re covered. It’s also sometimes called credit accident and health insurance.
Credit involuntary unemployment: Pays a specified number of monthly loan payments if you lose your job through no fault of your own, such as in a layoff, during the coverage term. It’s also known as “involuntary loss of income” insurance.

None of these coverages is required with a car loan. You can’t be denied credit if you say no to a credit insurance offer, Kukla says.

Payment Protection: A Newer Product
A more recent type of credit protection is called debt protection, which might also go by such names as debt cancellation, debt suspension or payment protection. Federal law allows national banks, most state-chartered banks and credit unions to offer this benefit without involving an insurer. The bank or credit union fills that role.

Debt protection provides benefits that are similar to credit insurance. It’s typically offered when you sign your loan papers.

A New Approach: The Walkaway Program
The Great Recession of 2007-’09 had a devastating impact on consumers and brought car purchasing to a near standstill. Who could feel comfortable buying a new car if there was a good chance you’d lose your job tomorrow? The recession has had “a major impact on the psyche of the car buying public,” says Steve Klees, senior vice president at EFG Companies in Irving, Texas.

In the midst of the recession, EFG partnered with Hyundai to offer the Hyundai Assurance program, introduced to consumers during the 2009 Super Bowl. It offered people the peace of mind to buy that new car. If you lost your job within a year of buying your new Hyundai, the automaker promised, it would take the car back. By the time that program ended in 2011, 350 people had returned their vehicles.

While Hyundai Assurance is gone, EFG makes available a similar product, called Walkaway, which is available through 350-400 dealerships, banks and credit unions across the country. When an involuntary job loss or other triggering event happens, the program releases customers from a car lease or loan obligation. Typically, the dealership, credit union or bank pays for the first year of coverage. After that, customers have the option of purchasing the coverage package for $395. There are no underwriting guidelines or restrictions except that the purchase price of the vehicle must be less than $75,000. “That’s probably 99.9 percent of all cars,” Klees says.

Klees says the “sweet spot” for Walkaway is with customers ages 25-40 — not surprising given that this group is least secure in their job situation, compared with other groups. Klees, a 35-year veteran of selling credit insurance and other add-on products, says purchasers of traditional credit insurance tend to be older.

What To Ask Yourself and the Lender
The popularity of debt protection products has been on the wane over the decades. In a long-term study for the Federal Reserve, the percent of people who said they purchased debt protection coverage in 1977 was 63.9 percent. In 2012, that dropped to 22.7 percent.

If you are interested in a debt protection product, the Center for Responsible Lending suggests that you purchase the products through a credit union or bank, where the rates may be lower. Compare any dealership price quote and terms to ensure you’re getting the best deal for comparable coverage. Also, the National Association of Insurance Commissioners advises you to ask these questions before you buy:

  • What’s the premium? Will it be financed as part of the loan? And will that increase your loan amount so you’ll have to pay additional interest?
  • Can you pay the premium monthly instead of financing the entire premium as part of your loan?
  • What’s the loan payment minus the credit insurance?
  • Will the insurance cover the loan’s full length and amount?
  • What are the limits and exclusions on payment of benefits?
  • Is there a waiting period before the coverage becomes effective? If so, how long?
  • With a co-borrower, what coverage does he or she have? What’s the cost for that coverage?
  • Can you cancel the policy? What kind of refund is available? Are there any penalties?

It’s also wise to see if you have other insurance that might eliminate the need for a credit insurance contract in association with your car purchase. A term life insurance policy would provide benefits in the event of your death. Your employer may make disability coverage available. Check with your insurance agent to see what your current coverage would provide before you buy credit protection.

If at any point you feel pressured to buy credit insurance, it’s best to simply walk away and consider your options in a pressure-free environment. In the words of the National Automobile Dealers Association, “once you sign the contract, you are legally obligated.”

Four Steps to Switching Car Insurance

 Could you save hundreds of dollars by switching your car insurance? It is a question worth asking yourself at least once a year. By doing a little research now, you may be able to find a comparable insurance plan at a better rate with another company, and save money. But you have to make sure you take the appropriate steps to switch, because you don’t want to have a lapse in coverage.

Jeanne Salvatore, senior vice president at the Insurance Information Institute in New York, suggests asking yourself if you’re happy with the cost, coverage and service of your current policy each time it comes up for renewal. “If the answer is ‘yes, yes and yes,’ then stay with them. But if you’re not sure, it’s a good opportunity to shop around,” she says.

Here are four key steps to take when it comes to switching car insurance:

1. Review your current driving situation.
Take note of your driving circumstances as well as the needs of other drivers in your household. Do you have a newer model car? Do you commute several miles each week to work? Do you have recent traffic tickets?

According to the National Association of Insurance Commissioners (NAIC), your potential new insurance company may ask you all of these questions as part of the underwriting process. You’ll also likely be asked about the number of drivers on the policy, your driver license information, and the insurance coverage and limits you’d like to purchase.

Take a look at your existing auto insurance policy. Knowing what you currently have will make it easier to create apples-to-apples comparisons with the rates you receive from different insurers. An easy way to do this is to study your current policy’s declarations page, says Vaughn Graham, president of Rich and Cartmill insurance company in Tulsa, Oklahoma.

“The declarations page describes the insurance you have, including the amount of coverage as well as coverage limits, and the amount of your deductible,” he says. When you’re more informed about your current coverage, it can help you become a smarter shopper.

2. Shop around.
Once you’re familiar with your current policy, it’s time to look for alternatives. A good first call is to your current insurance agent or the insurance company itself (some insurers, such as Geico and Progressive don’t work with agents). Even if you’re not happy with your existing policy (if you think the premiums are too expensive, for example), ask if there are ways to lower your rate for the same amount of coverage, says Salvatore. You may be eligible to receive discounts you’re not getting.

Here’s a list of common insurance company discounts, according to the NAIC:

  • Having safety devices in the car, such as anti-theft features
  • Having a good driving record
  • Driving a low number of miles a year
  • Having multiple cars on the same policy
  • Being a student who gets good grades
  • Insuring both your home and car with the same provider

While you’re reviewing discounts, be aware that switching to a new provider could affect discounts you already have with other types of insurance. For example, if you’re already getting a homeowner’s and car-policy rate reduction from your current provider, and you then move your car insurance to a different company, you may lose the discount you receive for homeowner’s insurance. It may make more financial sense to stay where you are, or switch both policies to a new provider that will give you a rate reduction for both.

In addition to speaking to your current agent or insurance company about your options, you can look online to research potential companies and obtain quotes. It is also a good idea to get referrals from family members, colleagues and other people whom you trust, Salvatore says. If they have had to file a claim with the insurer, they could tell you in person about their customer service experience.

If you’re currently buying through an independent agent who represents multiple insurance companies, you have a few more options. “You can go to them and say ‘I’m happy working with you, but I’m not so happy with this carrier’ and explain why,” Salvatore says. “Ask if they can suggest another carrier.”

A good agent should be able to offer you customized choices to fit your needs, adds Graham. “There is no one-size-fits-all solution. We’re all a little different.”

3. Don’t skimp on coverage.
As you receive quotes, make sure the insurance coverage and deductibles mentioned are satisfactory. Just because a rate quote may be lower than what you’re currently paying, it doesn’t mean it’s a better deal if the coverage is lacking, Graham says. If you’re not sure how much coverage you need, discuss your needs with insurance company representatives, and ask for guidance.

For example, if you have significant assets, you may need more than just the state minimum for bodily injury liability insurance. The same is true for property damage coverage. The retail price for an average new vehicle could easily top $30,000, but in many states, the minimum property damage coverage required is only $25,000. If you were responsible for a loss and did not have enough insurance coverage, you’d likely be on the hook for the difference. “Many of those limits are often inadequate and not near enough to meet today’s exposures to price of vehicles,” Graham says.

Though it’s important to have ample liability coverage, if you drive an older model vehicle that is paid for, you may choose to opt out of some optional types of coverage, such as collision and comprehensive insurance, in order to keep premiums low.

Collision insurance pays for the physical damage your vehicle receives if it collides with another object, such as a tree or another car. Comprehensive insurance pays for damage to your car from causes other than a collision. This could include vandalism, broken glass, fire and theft. If this coverage is more than your vehicle is worth, you could skip it to lower your rates. Just understand that you would then be paying for these losses out of your own funds if such damage did occur. People who live in areas prone to such natural disasters as floods, high winds and earthquakes might want to think about retaining their comprehensive coverage, experts say.

Another way to get a lower premium is to ask for a higher deductible. If you are willing to pay $1,000 out of pocket for a claim instead of $250, you could lower your rates. But make sure you can afford the higher deductible in the event that you suffer an insurable loss.

4. Notify your old and new providers.
After conducting all your research (and with a bit of luck), you may well find a company that offers good coverage at a lower rate. You may be willing to switch, but before you sign a new agreement, call your state’s department of insurance to learn if the company is permitted to do business in your state. You can also check out business-rating companies A.M. Best and Standard & Poor’s to check out the company’s financial stability. (Standard & Poor’s requires free registration before you can see company ratings.) It’s worth the extra time to spend before you agree to pay hundreds of dollars on a new policy.

Once you’ve verified that the new provider can do business in your state and appears financially stable, it’s time to make the switch. “When you are ready to cancel your current policy, let all parties know in writing, so that there is no gap in coverage,” Salvatore says.

If you end your existing auto insurance policy before it expires, you may receive a partial premium refund, depending on the terms of your agreement. However, you should continue paying for your old policy until the new coverage is confirmed in writing. Otherwise, the old policy could be dropped for non-payment before the new policy starts. And in most states, driving without proper car insurance coverage is against the law. “It may be easier to wait and have your new policy start when the old one expires,” Salvatore says.

Make it a priority to review your insurance policies on a regular basis. Household driving situations change often, and so do state laws that could affect the price of your premiums. By taking some time each year to do some car insurance research, you can make better decisions and pay the best possible prices for the best amounts of car insurance coverage.