Usage based Auto Insurance article, (Smart Money)

More Americans say they're willing to be spied on – if it reduces their auto insurance rates.

Of the more than 2,000 consumers surveyed for LexisNexis Risk Solutions, half said they’d sign up for usage-based insurance if they’d save at least 10 percent on their premiums.

That comes at a time when the average auto insurance premium soared by $153 between 2012 and 2013, according to a study by J.D. Power.

Not all insurers offer usage-based or pay-as-you-drive auto insurance programs, or they may only offer them in certain states, so you may have to check with a number of insurance companies to find one that has what you want.

The LexisNexis survey found that more than a third of consumers would be willing to switch companies if they could save at least 10 percent on their premiums.

While big savings are possible with pay-as-you-drive – some insurers tout discounts of up to 50 percent — there’s no guarantee you’ll save that kind of cash.

The sweet spot in savings comes to someone who doesn’t drive a lot, drives safely, and stays off the road in the middle of the night.

We did a TV news story about pay-as-you-drive insurance a couple of years ago. Check it out, and then read on for more.

How it works:

Programs such as Progressive’s Snapshot send you a device that plugs into your vehicle’s onboard diagnostic port, which is usually located beneath the steering column. It then records information on your mileage and driving habits and sends them to your insurance company.

State Farm’s Drive Safe & Save program uses your auto’s OnStar, In-Drive or Sync communication system to collect your driving information.

What it looks at:

What’s taken into account when setting your discount depends on the auto insurance company. Along with looking at how much you drive, some insurers are interested in seeing how you drive and when you drive.

Allstate says you should benefit the most from its Drivewise program if you drive no more than 12,000 miles a year. You could still see some cost savings if you drive 12,000 to 15,000 miles each year. (Your insurer may already provide a discount if you drive less than 12,000 a year. Call and ask.)

Besides tracking mileage, insurers may check to see if you brake hard, if you make jack-rabbit starts, if you speed, or if you routinely drive late at night or in the wee hours of the morning.

How much can I save?

Like everything auto insurance-related, discounts vary from person to person and state to state.

State Farm promises a discount of up to 50 percent with its Drive Safe & Save program.

With Allstate’s Drivewise program, you’ll get a 10 percent discount when you sign up, but the full discount won’t kick in until your policy renews. At that time, you can save up to 30 percent on your rates.

Progressive also offers you an unspecified initial discount when you try Snapshot, and the complete discount after your information has been collected for five months.

What can happen to my information?

While the insurance companies that have pay-as-you-drive programs make assurances that your driving data is safe from prying eyes, there are still privacy concerns about how the information might ultimately be used.

For instance, Brent Hunsberger wrote in The Oregonian:

“Can others get the information? Law enforcement certainly can, and the information could be sought as part of a civil lawsuit.”

Despite those privacy concerns, industry experts predict 20 percent of consumers will have usage-based insurance in the next five years, according to the National Association of Insurance Commissioners.

Are you willing to share more information with an insurance company to qualify for lower rates? Let us know on our Facebook page.

For more information: Sturdevant Agency or Ian Sturdevant 

Insurance what it is and what it's not

I talk to a lot folks about their insurance needs, be they car, home, or business owners, and they all tend to ask me for the same thing – a cheap deal.

Let’s start with the basics, what is insurance? In its most basic form insurance is a transfer of risk. An insurance policy is a contract, where by you, the consumer, become the insured. The insurance company agrees to take the risk that you transfer to them, in exchange of a fee, known as a premium.

The premium is the part of this process most of know well, it’s related to us in the form of a bill that arrives every month or so. Our desire when we shop for a new policy is to get a better rate, or lower premium.

Fair enough, I’m always happy to help my clients and prospective clients save money, and there are many ways to program an insurance policy to make it less expensive, as reflected in the monthly premiums.

Thing is – the PRICE of insurance isn't always the same as the COST of insurance. The price is what we just talked about, the premium, that bill you pay every month. The cost, of insurance is a formula, add your premiums, to your deductibles, plus any uncovered losses, and that is the real cost of your insurance policy.

Now, that’s a bit of a mouthful- so what does it all mean. Well, we know about the premiums, let’s talk about deductibles next.

Deductibles are the amount the risk you are retaining when you buy an insurance policy. If you have a $2000 loss on your car, and a $500 deductible, the first, and it’s key to remember FIRST, $500 used to pay for the repairs will come from your deductible, in other words, your pocket. A higher deductible will mean a lower premium, which is good, but at time of lose; you will need to dig a little deeper.

The last part of that formula was uncovered losses. This is the hard part for me as an insurance professional. Sadly, I see the impact unfortunate choices, mostly when purchasing auto insurance, and how they play out later. Again, focused on premium, state minimum coverage limits are procured. To be sure, such limits can, though not always, make the final premium, less expensive. Once the policy provisions are maxed out, the balance of the loss, will be borne by the insured, you.

In our prior example, your car was damaged, which is a bummer, but in the grand scheme of things, survivable. Now imagine, instead of your car, it was someone else’s car that you damaged, and there are people inside, and they are hurt. These costs can be huge, much more than the state minimums.

What I’m talking about is liability. And to be fair, when you sit down with me to transfer your risk, it’s your liability risk that is first and foremost on my mind. The exposure you have to a liability loss is ever-present, and limited only by the imagination of the lawyer who sues you.

With that in mind, I advise my clients to buy insurance based on these fundamental principles.

1. Mitigate losses to your property – risk management (both personal and commercial)

2. Buy the highest deductible you can afford – this is a personal choice but a good rule of thumb is this question. If you would not put in a claim at that value (i.e. $750) than your $500 deductible is too low, and you should consider raising it.

3. Buy a policy with liability limits as high as you can afford – uncovered liability losses can wipe you out financially, remember what you are buying, a transfer of risk, and transfer as much of your risk as you can.

4. Work with an agent who will give it to you straight – it pays to shop your rate around and get some competitive quotes. You may also find some sales folks willing say just about anything in order to entice you with a lower premium. Find one you trust, willing to lay their cards out on the table for you. Remember the lowest price may not be the best deal for you and your family. It might just be a – cheap deal.

For more information: Sturdevant Agency  or Ian Sturdevant