Telematics, or pay as you go car insurance, is increasing in popularity — we take a look at how it works and the pros and cons to such policies
For drivers only using their cars once in a while, the high cost of car insurance can be pretty hard to stomach. What’s more, drivers belonging to so-called high-risk groups, such as young and elderly drivers, are often hit with hefty premiums, despite only using their cars infrequently.
Pay as you go insurance
A solution could come in the form of telematics insurance, which counts your miles as you drive, among other things — essentially, pay as you go insurance, or pay as you drive insurance.
Some parts of the car insurance industry also refer to telematics car insurance as black box car insurance, and although there are some slight differences between pay as you go and pay as you drive insurance, all these terms come under the same type of car insurance.
What is pay as you go car insurance?
Telematics insurance technology works by having a small device, known as a ‘black box’, fitted to your car. The box then uses satellite technology to track mileage.
Normally, drivers are charged a set amount per year and allowed to drive a certain number of miles before being charged extra. Pay as you go insurers allow you to top up in bundles of miles which you can roll over to the following year if unused.
Many telematics boxes also track things like acceleration, braking, cornering, and journey time, enabling insurers to take these factors into account when working out the cost of premiums. Motorists are also able to monitor their driving behaviour online.
Who benefits from telematics?
With statistics showing that young drivers are more likely to have accidents and make insurance claims than any other age group, this age group is likely to benefit most from pay as you drive car insurance.
In fact, drivers aged 17-21 with zero no claims could save an average of £1,282 by choosing black box insurance over a standard policy (based on quotes generated by uSwitch between November 2016 and January 2017).
Drivers using their cars outside of peak traffic hours could also save, as some insurers charge less for miles driven when the roads are emptier and accidents less likely.
Advantages of pay as you go insurance
The advantages of telematics insurance or pay as you go car insurance are clear. Put simply, the less you drive — and the safer your driving — the more you stand to save on insurance.
Also, as cars spend less time on the road, the number of accidents decreases — the car insurance industry has stated that telematics insurance products cut accident rates by about 20%.
Pay as you go car insurance could have a positive impact on the environment, with people more likely to ditch their cars in favour of public transport if they knew their premiums could go up if they were to exceed a certain number of miles.
The black box also acts as a tracking device, meaning that stolen cars can be traced easily.
Disadvantages of telematics insurance
A number of factors, such as moving house or job, have the potential to impact the amount of miles you drive each week, while the idea that you might be penalised for absent-mindedly exceeding the speed limit could make drivers nervous.
Black box devices are also unable to tell the difference between drivers, meaning that if various people are all using the same car, they could all be charged at the same rate as the most expensive driver.
Pay as you drive insurance vs pay as you go insurance
Despite the terms being used interchangeably to describe telematics car insurance, there can sometimes be a difference between pay as you go car insurance vs pay as you drive car insurance.
Some car insurance providers will market them as one and the same, so be sure to look out for what its key components include.
Pay as you go car insurance usually means that your policy is based on how much you drive. The device fitted to your car will thus keep track of the number of miles you do to make sure you don’t go over the agreed limit.
You may even be able to top up your pay as you go car insurance to get more miles out of it. As explained earlier, these types of policies are often aimed at people who don’t use their car all the time but want to use it occasionally without paying high premiums.
Pay as you drive car insurance usually means that the black box fitted to your car will assess how you drive and give you a policy based on your driving style.
Curfew car insurance
This could mean you get restrictions on how fast you can drive and what time of day you can be on the road. The disadvantage is that you could be stuck in traffic just before the curfew and have to pay a penalty, or your driving score could be affected.
This type of insurance is sometimes referred to as curfew car insurance and has received negative press because it could encourage young drivers to break the speed limit in order to get home in time.
In recent years, many insurers have removed the curfew requirement from their pay as you go policies as well as the £100-150 fine incurred by driving late at night. Rather than charging a one-off penalty, most modern black box insurance policies will not take late night driving into account, while others may simply amend the driver’s score for consistent late night driving.
If you think you will drive at night, it’s important to check curfew terms of the policy before buying. If you are certainly set on getting telematics car insurance, then decide what restrictions you would be prepared to live with.
The black box fitted to your car can monitor a number of things you do but you do not have to pick a policy that’s too limiting to your driving style.
That could come down to your budget, but staying safe on the road should be a priority and if you’re not one to be encouraged by a curfew or mileage limits, then pay as you go insurance may not be the best option for you.
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