Usage-Based Car Insurance: What You Need to Know

August 22nd, 2019

Car in the distance performing a road safety test through some cones.

What is usage-based car insurance?

Usage-based car insurance, also known as “pay as you drive” (PAYD), “pay how you drive” (PHYD) and telematics insurance, is when premiums are determined by an individual’s driving habits. Although not the only factor, a driver’s car insurance policy becomes more dependent on their competence on the road. Consequently, the drive is more accountable for their own car insurance rates.

Currently, it is not legal for insurance companies to raise your rate because of your participation in usage-based car insurance. They can only lower your car insurance rates or keep them the same.

Using a special device installed on your car or via a mobile phone app, usage-based insurance uses GPS technology and an accelerometer to assess factors that might contribute to how responsible of a driver you are. This can include rapid braking and rapid acceleration. They also track when you drive, how frequently you drive, and how far you drive. This indicates your level of general statistical risk. For example, if you commute during rush hour and drive 50 kilometres each way, you’ll be statistically more likely to be involved in an accident than if you only drive on weekends over short distances.

Why should I consider usage-based insurance?

If you are a decent and responsible driver (even if your rates are higher because you are classed as “high risk” thanks to your age or inexperience) you can potentially lower your premiums through pay as you drive car insurance. Additionally, by using usage-based insurance, you get a close look at your personal driving practices through the virtual platform the company supplies and gives you the chance to improve.

Remember, your insurance company cannot currently raise your rates if you opt for usage-based insurance; it can only lower them.

A lot of insurance companies are now offering usage-based coverage in Canada. If you think this type of program might be beneficial for you, talk to an insurance broker. They will be able to help you make a decision that is best for you.

Blog Author: Gabrielle Reid

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