Consumer Reports: Saving money with usage-based car insurance

Imagine paying less for car insurance just for being a good driver. It's called usage-based insurance - drive safely, and keep to certain mileage limits, and you could save a bundle on premiums.

But it also means having your insurance company track how you drive.

Roger Lane recently signed up for usage-based car insurance.

"I decided to do it really for the saving," says Lane.

He's hoping to save 20 to 30% off the $2500 he's been paying yearly on premiums, but with a trade off: Drive safely and log fewer miles.

Numerous major insurance companies like State Farm, Nationwide, Allstate, and Liberty Mutual offer the program.

Using a smartphone app and a tag or dongle, insurance carriers monitor acceleration, braking, cornering, speed, and phone use, and provide a score.

"This last trip gave me a rating of 5 stars," says Lane.

If your score indicates low risk driving, your premiums could be reduced significantly - in some cases up to 50%.

"I think that this gives an extra impetus to really follow speed limits," says Lane.

To get the discount you'll also need to watch how far you drive. For example, State Farm considers 7,500 miles a year or less low mileage.

But if your driving suggests risky behavior, some insurers could charge you even more. And while some companies say they don't share your information, for some people, privacy may be a concern.

"If you're in an accident, your information can be used, for example, by law enforcement," says Consumer Reports Money Editor, Tobie Stanger.

"I don't have a problem with that. I have a cell phone as it is, so the fact that I could save money by being watched is acceptable," says Lane.

To keep your car insurance costs low, make sure you're taking advantage of all available discounts. Ask about discounts for the safety and security features built into your car, good student discounts, even discounts for maintaining a good credit score!

To read the full story from Consumer Reports, CLICK HERE.
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