You may not realize this but driving to and from work regularly during rush hour traffic may affect your car insurance quotes. If you’re always part of this daily madness, then it’s very likely that you’re sharing the road with tired, angry, and impatient drivers and your insurance company may consider you a potential accident waiting to happen.
Those frenetic miles you drive each day puts you at higher risk of getting into a fender-bender, regardless of whether it’s your fault or not. Fortunately, if you don’t spend a lot of time driving during rush hour, there’s an insurance option that lets you avoid higher insurance rates. This is known as Pay As You Drive (PAYD) insurance.
This kind of auto insurance utilizes different factors to calculate your rates. PAYD insurance considers the year, make and model of your vehicle compared to your driving mileage, the places where you drive and what time of the day (or night) you drive.
How Does It Work?
Pay As You Drive, is based on your driving mileage. But it calculates your insurance costs not only based on how frequent you drive but also where and when you drive. There are three kinds of Pay As You Drive insurance:
- Basing your insurance cost on your vehicle’s odometer reading.
- Basing your insurance cost on the amount of time (in minutes) you use your car.
- Basing your insurance cost on the information that is collected from the vehicle like the speed you are driving, the time of day or night you drive, the amount of time spent on the road, etc.
Insurance companies often use RF technology or cell phone data to get the data they need for those who opt for usage-based insurance.
Other Factors That Affect Car Insurance Rates
On top of the mileage and time you spend driving your car, there are also other factors that insurers base their rates on:
- Driving history
- Type of vehicle
- Your location
- If you use your vehicle for work
- Credit history (for most states)
In simple terms, if you’re a male 18-year-old driver who’s been given an expensive car, insurance companies will see you as a very high-risk driver, and as a result, you will have to pay very high premiums. You will be assessed based on what others in your category have done historically even if you’re not a bad driver yourself.
Location and distance driven are also important factors that can affect your insurance rates. If you spend less time on the road, then you’re likely going to pay less for your insurance coverage because you’re less likely to be involved in an accident. On the other hand, if you drive for long periods of time particularly through rush hour traffic, then you should expect higher rates because the risk of you filing a claim is greater.