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Reduce Your Insurance Costs? There’s An App For That

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It’s long been an established rule of the auto insurance industry: by keeping rates fairly uniform, people who drive their cars less are, on average, paying more for their insurance based on use than heavy drivers. One San Francisco-based tech company, however, is aiming to change that for good.

metrommile

How it Works

Metromile is a new startup that’s packed a one-two technological punch to save drivers money on their insurance: installing a small GPS device that attaches to your car, the company records your actual mileage. That gets sent back to Metromile, who can charge a lower, per-mile rate through their insurance brand under National General Insurance Group.

Large carrier programs such as Progressive’s Snapshot, State Farm’s Drive Safe and Save program, Allstate Drive Wise, The Hartford TrueLane, and Travelers IntelliChoice use telematics to gather more information on driver behavior and mileage with the possibility of lower rates for the driver. However, these programs don’t integrate with an app the way Metromile does.

Smartphone, Smart Car: Smart Insurance

Meanwhile, Metromile takes it even further with their new smartphone app: it uses that same GPS data to help you calculate routes and avoid street-cleaning areas to avoid parking tickets.

The entire system is designed around saving low-mileage drivers money, which is not typically the focus of traditional insurance companies. For many carriers, since low-mileage drivers pay more on aggregate for their insurance, they are subsidizing higher-mileage drivers.

Meanwhile, the device also tracks diagnostics on the vehicle, making any car function as a smart car– and one that becomes easier to maintain, thus making it an even safer bet for insurance companies.

metromile app

Is Per-Mile Insurance a Winning Proposition?

Metromile allows drivers to use their diagnostics system free, in exchange for a monthly message telling them how much they would have saved with Metromile.

This leads to a problem for traditional insurance carriers: if companies switch over to per-mile billing and charge lower-mileage drivers based on usage, they’d have to compensate for the higher-mileage drivers by passing those costs on to them. The entire auto insurance system as understood today would be substantially strained, and this allows Metromile far more control over its niche.

Metromile isn’t available everywhere–as of this writing, it’s available in four states – but it’s growing quickly enough to change the auto industry in short order.

70% of drivers in America drive less than 10,000 miles a year: that’s a very large market to tap into. If Metromile succeeds in its goal of bringing per-mile insurance to the masses through convenient apps and technology, it could spell big changes in auto insurance as the industry knows it.

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Is Car Rental Insurance Worth the Money?

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You’re at the checkout counter getting ready to pull off in your rental car, and a sales rep asks if you’ll be taking the optional rental car insurance… what should you do? On one hand, adding the rental car insurance would cost you an extra $20 or more per day. However, if you should happen to get into an accident in the rental car, are you covered and are you willing to take that risk?

rental car companies

Cost of Rental Insurance vs. Traditional Insurance

Before saying yes or no to this insurance policy you should first consider all of your options. Factors that should be considered include the cost of the rental company’s insurance per day vs. the cost of your car insurance policy, as well as what coverage you’re offered while driving a rental car.

Find out from the rental car company how much it is going to cost you to purchase their insurance policy. Some companies charge a flat rate, while others charge a daily rate for insurance. If the cost of the insurance is approximately $30 per day and you’re using the rental car for 5 days, you’re looking at an added expense of $150, no small sum. Drivers in some states pay less than $50 per month for their entire auto insurance policies.

You already know what the cost of your insurance premium is per month; however, consider how much it will cost in the event that there is an issue while driving a rental car. What is your current deductible? Most people have a deductible between $500 to $1,000.

What Is Covered by Rental Car Insurance?

Now you should factor in what is covered under both insurance policies. You want to make sure that the rental car is covered entirely to avoid high out of pocket expenses or duplicate coverage. Most rental car companies provide loss and damage coverage which would essentially cover the cost of any physical damage or the expenses in the event that the car is stolen or vandalized.

Traditional car insurance providers generally cover collision expenses, but you’ll need comprehensive to cover expenses in the event that the vehicle has been stolen or vandalized. Also, keep in mind that a deductible will be involved in the collision or comprehensive coverage.

car hire companies

Does Rental Car Insurance Make Sense?

If you currently have full coverage insurance, purchasing additional rental insurance likely does not make sense. Why? Because you’re already paying a monthly premium for insurance, and unless you’re a bad driver or visiting a high crime area, the chances of you getting in an accident, or having the car stolen are slim. However, if you do not have any type of car insurance or have minimal liability coverage, it may make sense to go ahead and pay the extra few bucks for the rental insurance.

Weighing your options is imperative when deciding on whether or not you should obtain rental car insurance. You may also check with your credit card companies as many of them offer rental car insurance protection which may prevent you from having to pay an extra daily fee for something you have no need for.

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How Much Does Mileage Affect Auto Insurance Rates?

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There are several factors that impact car insurance rates—mainly, what the person is using the car for, how often the person drives, and the annual mileage. The annual mileage can be described as the amount of miles the motorist puts on the vehicle per year whether it is commuting for work, errands, business trips, or road trips.

Average Mileage

The average person with a car drives between 12,000 and 15,000 miles. It is the range that most car insurance companies use as a yardstick. A few companies, however, adhere to limits that are a little higher or lower than the aforementioned numbers; some are known to have the cutoff mark as low as 7,500 miles.

road trip

Obtaining Discounts

Usually, car insurance companies offer ‘low-mileage’ discounts to motorists who drive fewer miles than the average. A prime example is National General Insurance, notable as the only insurance company in the United States from the automotive industry itself, and which was formerly known as GMAC Insurance.

In most states, motorists with OnStar subscriptions can get a low-mileage discount—anywhere from 10 to 50 percent—when they drive less than 15,000 miles a year. The mileage is tracked by OnStar’s telematics technology. In the car insurance industry, this type of insurance is sometimes referred to as usage-based insurance (UBI).

More Mileage = More Risk

Regardless of the maximum mileage limits, though, each car insurance company increases the insurance rate once the motorist goes above the maximum annual mileage limit. That’s because higher premiums are based on the theory that the motorist increases his or her risk of getting into an accident with increased time on the road.

This is especially applicable to people who frequently travel long distances, experience congested traffic or drive in large cities. The car is more exposed to sleep deprivation, tailgating, and rougher roads.

On the other hand, motorists who primarily drive on highways or rural roads, or drive short distances, do not have as much of a risk, since driving conditions are generally a lot more favorable. Thus, insurance companies make sure that they evaluate other factors alongside mileage, since there is never a “one-size-fits-all” concept when it comes to insuring motorists and their vehicles.

saving money

Tips to Save

By keeping annual mileage down, you can keep your auto insurance rates lower. If your driving situation changes such as your work commute is reduced or you are no longer working, be sure to let your insurance company know so your rate can be adjusted accordingly.

One word of caution – don’t try to cut corners on your insurance by under-reporting mileage. You could be committing insurance fraud and if a claim is filed, untruthful statements could be used to deny the claim, which could put you at serious financial risk.

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When Do You Need Short Term Car Insurance?

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Sometimes it just doesn’t make sense to take out a full policy for coverage on an automobile. This circumstance may arise if you plan to borrow a friend’s car for a few days, add someone to your insurance for a week, are visiting a particular area only for a short time, or need drive-away insurance upon purchasing a car.

Lasting up to 28 days, adding on a separate short-term car insurance policy gives you temporary coverage for other drivers on your vehicle without putting added stress or expense on your main car insurance, according to the Automobile Association.

woman driving

Benefits

Short-term policies such as these allow you to avoid the long-term commitment that comes with a standard auto insurance policy. Let’s face it: insurance premium on annual policies are pricey. When you need to save money and you know you only need the vehicle for a few days or weeks, you can use short-term car insurance to meet your financial security needs but keep cash in your wallet at the same time.

With short term insurance, you don’t have to sign up for a full year like your standard insurance policy, so you don’t have to face that added expense, especially when you only need it for a week. Adding another driver is expensive, especially if the other driver gets in an accident while in your car.

How to Obtain It

The best method to get short-term car insurance is to apply for it through the insurance provider you already have. The process should go quite quickly because your paperwork is already on file, including your driving records and history. You will likely get a discount when you go this route as well. If you decide to go through another insurance carrier, do your research thoroughly, as prices vary widely among competitors.

There are a few pieces of information you should have handy, such as the name of the borrowed car, the vehicle owner’s name and contact information, and a valid driver’s license. It’s best to get quotes from at least three insurance providers so you can choose the most affordable and comprehensive one for your needs.

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What Type of Auto Insurance Covers Trailers?

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The law says that all motorized vehicles need to be covered by liability insurance, but the same rules do not apply to trailers. Many states do require trailers to be licensed, but they aren’t motorized vehicles and do not need to be covered by insurance. Trailers are just as vulnerable to damage as any car or truck, so insurance coverage is a must for drivers using trailers.

For some drivers using trailers, the condition of the trailer is an after thought. Tire neglect or trailers in a poor condition are seen on the roads. This presents a serious risk to those on the road and is another good reason to purchase ample auto insurance protection.

cricket trailer

Covering Your Trailer with Your Auto Insurance Policy

Although trailers do not need to be insured, many auto insurance policies cover them anyway. The laws regarding what is and is not covered by a liability insurance policy vary by state, so you should check your own auto insurance coverage to make sure that anything you haul with your vehicle is covered.

If you find that your trailer isn’t covered by your existing auto insurance, you don’t need to worry about breaking the bank to get your trailer insured. Unlike auto insurance, any insurance that covers your trailer is fairly inexpensive. Trailers are considered property as opposed to motorized vehicles, and any insurance policy you have on your trailer whether it be a boat, camper, horses, motorcycles, bicycles, ATVs, snowmobiles, or personal items, will be unaffected by anything that could raise your auto insurance rates.

Obtaining a Trailer Insurance Quote

The kind of coverage you will need for your trailer will depend on the type of trailer and how it will be used. For example, a horse trailer will be subject to different rules than a boat trailer. Your rates will also depend on the length and width of the trailer and whether it will be used for commercial or private use.

Keep in mind that insurance laws vary from one state to the next, so make sure you are knowledgeable of your own state’s insurance requirements before you start looking for a good insurance quote. This also should be taken into consideration if you plan to travel across the state with your trailer, especially if you are using it for commercial purposes. If you have any questions about your auto or trailer insurance, contact your insurance carrier before making any assumptions.

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