buying Low-mileage drivers are at lower risk for accidents, but they usually pay just as much for insurance, study says

02:51  09 march  2018
02:51  09 march  2018 Source:   Tribune News Service

How Do Those Car Insurance Tracking Devices Work?

  How Do Those Car Insurance Tracking Devices Work? It may only be a matter of time before insurance companies require these devices.Over the last several years, auto insurance companies have been promoting tracking devices, known in the industry as "telematics devices," to follow the driving habits of their customers. Savvy drivers have wondered what they do, how they work, and if they really help drivers save money on car insurance premiums.

a person driving a car: A new study shows what matters when it comes to how much you pay for car insurance.© Dreamstime/Chicago Tribune/TNS A new study shows what matters when it comes to how much you pay for car insurance.

When it comes to how much you pay for car insurance, being married and having good credit often matters more than how much or how well you drive, according to a new study.



The research, released this week by the Consumer Federation of America, found that major auto insurers provide little or no discounts to low-mileage drivers, even though they tend to have a lower accident risk.

The study looked at basic liability coverage at major insurers, including Farmers, Progressive, Geico, Bloomington-based State Farm and Northbrook-based Allstate. Drivers in 12 major U.S. cities were examined as part of the study, including Chicago, Atlanta, Baltimore, Cleveland, Houston, Minneapolis and Oklahoma City.

The great myth about car insurance costs

  The great myth about car insurance costs Consumer watchdogs say insurance companies are doing you no favors if you're one of these lower-risk driversThat's the counterintuitive, but probably accurate, picture drawn by two surveys of auto insurance rates -- one by the Consumer Federation of America (CFA), the other by Internet auto insurance search engine The Zebra.

The study found that on average, motorists save only $30 per year - or 1.6 percent of their insurance premiums, on average - for every 5,000 fewer miles driven each year. In Chicago, drivers receive less than 2 percent savings for lower annual mileage.

The only exception was in California, where state law requires insurers to give a driver's annual mileage the second-most weight in determining premiums, according to the federation.

In California, motorists who drive 5,000 miles or less annually saved $81 a year on average, or 8.7 percent across the studied insurance providers. In Los Angeles, very-low mileage motorists who drive 2,500 miles or less annually saved $346 a year, or 30 percent compared with high-mileage motorists, the study said.

What Is Gap Insurance (And Why You May Need It)?

  What Is Gap Insurance (And Why You May Need It)? It helps protect motorists who are "upside down" on a lease or car loan.If you’re buying or leasing a new car or truck these days, you’ll likely be offered – perhaps required to purchase – so-called gap insurance. This type of policy covers the difference between what a given vehicle is worth and what the owner or lessee still owes on it, should it be stolen or become totaled in an accident. For the record, “gap” stands not for the above imparity, but for Guaranteed Auto Protection.

At Farmers and Progressive, motorists outside of California received no discount at all for driving 2,500 miles or less annually. In fact, they paid the same rate whether they drove 2,500 miles annually or 22,500 annually. "You can drive 2,500 fewer miles per year and pay the same premium for your liability coverage," said Doug Heller, an insurance consultant at the federation.

However, locally based providers Allstate and State Farm provided some discounts for low-mileage drivers in Chicago.

At Allstate, the insurance premium for a motorist with an annual mileage of 2,500 is nearly 19 percent lower than what drivers with 7,500 annual miles are charged.

At State Farm, Chicago low-mileage drivers paid 10 percent less than those with an annual mileage of 12,500 or more. At Geico, low-mileage drivers paid, on average, 5 percent less than high-mileage drivers in Chicago.

When insurance companies diminish the impact of mileage in their pricing methods, lower-mileage drivers are punished by having to overpay for coverage, according to the study.

Consumer Group Blasts Auto Insurers for Paltry Low-Mileage Discounts

  Consumer Group Blasts Auto Insurers for Paltry Low-Mileage Discounts You might think your car insurance company will give you a price break for driving less. But not all insurers offer discounts to low-mileage drivers. On average, folks outside of California save $30 per year, or 1.6 percent, for every 5,000 fewer miles driven. That’s compared with an average savings of $81, or 8.7 percent, in California — which is an exception because its regulations require insurers to charge lower-mileage drivers less.Analyzing mileage discountsFor its research, CFA got premium quotes for basic liability coverage in 12 different U.S. cities — one in California, and the rest elsewhere.

While Farmers and Progressive offered no discounts for low-mileage drivers, locally based Allstate and State Farm offered modest discounts across all markets of 2.9 percent and 3.2 percent respectively. Neither firm could immediately be reached for comment. Geico, also included in the study, showed an average 1.3 percent annual reduction for low-mileage drivers in the cities studied, according to the federation.

On a call with reporters, federation officials said the study is based on quotes received online by a fake standard applicant they created to test out insurance premiums in each test city: a single 30-year-old woman, who worked as a bank teller with a perfect driving record.

There are no figures on how a male applicant would have fared, federation officials said.

Facts such as credit scores and having a blue-collar job don't send risk signals to insurers, Heller said.

But "people do get that how far you drive is a very fair (measure of risk)," according to Heller.

If you are a low-mileage driver, "It's always a good idea to shop around, because there's probably a better deal for you," he said.

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Distracted Driving 100 Times Worse Than Expected .
For years, researchers have said distracted driving is a major cause of car accidents and deaths. By some measures, the problem is worse than drunk driving. A firm that analyzes driver behavior claims that the problem is 100 times worse than its experts had believed until recently.Car research firm Zendrive claimed in its Zendrive’s 2018 Distracted Driving Snapshot that: Overall, we found that 60-percent of drivers use their phones at least once during the day, and that at any given hour, on average, 40-percent of drivers use their phones at least onceZendrive estimates that 69-million drivers use their phones each day.

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