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If you are searching around for ways to save on insuring your vehicle, you have probably come across all kinds of different types of coverage and insurance types. With all of these, you pay for your coverage for defined period of time.

Pay-as-you-drive insurance is a bit different. Rather than paying for a period of time (a month, 6-months, a year), you pay only for the miles you actually drive.

About Pay-as-you-drive Insurance

It’s been around a while, but only now is it catching on in America.
The idea is simple: you pay for every mile you drive, because that is when you need most of the coverage. This obviously doesn’t include comprehensive coverage and any other non-driving situation.

How Miles are Reported

Since you pay by the mile, you and your insurer have to have a way of settling on a number.

Black Box

New technology is partially what is fueling this increase in companies offering pay-as-you-drive plans.
One such innovation allows for GPS-enabled chips to be installed into your car’s computer. These automatically report your mileage to the insurance company.
(Aside from the insurance itself, you can also save money because your car will be easier to recover if stolen, thus reducing the chance that the insurer will have to pay to replace a vehicle.)

OnStar

This is the other big technological innovation that can help you save on insurance. Since this is for GM vehicles, you should get insurance through GMAC. This way, OnStar will automatically report your mileage to GMAC. You can even call them at any time to see how much you owe at the moment.

Checkups

With this system, you meet with a mechanic, agent, or some other specialist that your insurer selects. They check your mileage each billing period and then the insurer sends you a bill.

Honor System

Admittedly, this is rare.
Smaller insurers will allow you to report your mileage without confirmation. However, should you be found to have not reported the accurate mileage, you will be denied claims and probably dropped as a client.

Is Pay-as-you-drive Car Insurance Right for You?

Unfortunately, this might not even be available to many people because of the limited areas and companies offering pay-as-you-drive insurance.
Currently, State Farm, Progressive, and GMAC are all offering usage-based systems. (more…)

Insurance has long been split on the gender issue – not whether they can use gender to determine rates, but if men should be charged more than women or vice-versa. The ethical question, however, has been debated by governments recently, leading to several industry regulations changes that now restrict the use of gender statistics in determining insurance prices.

The Case Against Gender Rating

Gender rating, as it is known in the insurance industry, is the practice of using statistical analysis to assess risk based on gender and then to charge for insurance accordingly.

Traditionally, this has led to higher prices in health insurance for women as compared to men, and lower auto insurance premiums for women as compared to men.
Health insurance, and to a large degree auto insurance also, is largely determined by two statistical categories: age and gender.

While long practiced, people outside the industry have been critical for decades of this practice that they argue is sexist, archaic, and ineffective.
One activist argued that, “how effective this is doesn’t really matter. The fact is, whether gender rating benefits men or women, it is unethical. It sets a bad standard for the way we do things in this country, where there are few women CEOs and women make far less money than men doing the same jobs.

The statistics are pretty prosaic and don’t seem to back up the rates,” a former insurance actuary said, adding, “there are far more effective ways to determine rates.” Industry-hired actuaries dispute this claim.

California Regulators Ban Gendered Pricing for Health Insurance

In 2010, activists struck a big blow by pushing the state legislature to pass a law that prevents health insurance companies from factoring in gender when determining health insurance rates. The efforts were aided by large national reform on an industry that many feel discriminates unfairly and fails to protect consumers, since they are motivated entirely by profits.

The new law takes effect far before the date a federal ban will come into effect: 2014. Women should see there health insurance rates come down by as much as 30% at this time, as has been observed in California. (more…)

I’m sure you’ve seen the commercials touting accident forgiveness as some kind of auto insurance messiah. The notion that you could cause one collision and not have to pay any more in premiums thereafter sounds like a fairy tale.
Well, according to several consumer advocates, it is.

Saying it chalks up to an advertizing gimmick, and a very good one at that, one advocate interviewed for this article said, “Sure, these clauses exist, but if you can get one for a reasonable price then you probably don’t need it.”

What is Accident Forgiveness?

After an at-fault collision, most drivers see their insurance rates spike by as much as 40%!!! For many people, that can mean well over $1,000 more in payments a year.

Accident forgiveness is a clause you can tack onto your insurance policy that says your rates will not go up any after your first at-fault collision.

In exchange for this add-on, the insured party has to pay higher premiums from day one.

Who is Eligible for Accident Forgiveness?

First off, accident forgiveness is not available from most insurance companies.

The insurer will need to assess your driving record in order to determine what you should be charged for accident forgiveness, so young and new drivers are not eligible.

People with bad driving records (lots of tickets and a few collisions) will also be excluded from eligibility. If you do qualify for it, it might cost so much in premiums that it is not worth it.
People with stellar driving records do qualify.

Who Can and Cannot Benefit from Accident Forgiveness?

No matter who you are and how good your driving history may be, your premiums will increase with an accident forgiveness clause on your policy.

Teenagers and parents with teenagers on their policy will also not benefit from this because teen rates do not usually go up after their first accident, unless there are criminal circumstances involved (which would not be helped by an accident forgiveness clause). Teens are assumed to be high risk already, and one at-fault collision just confirms this. Simply put, you can save more money without the add-on.

People with bad driving records probably won’t be offered the option of accident forgiveness. Even three collisions in the past five/ten years might be enough to disqualify you. Why? It would be bad business for them to offer this clause to people who will probably use it!

People with clean records might benefit from it if they happen to get in an accident within 6 months of signing the policy. However, if you haven’t been in a collision ever or in the last ten years, then your rates would probably not go up much anyhow. In fact, the increase in your premiums for adding the clause would likely be higher than the increase in your insurance were you to cause a collision. (more…)