Will Driving During Rush Hour Cost You More on Your Auto Insurance?

Miles of traffic, edgy, impatient drivers and road rage are all aspects that characterize rush hour traffic. If you are part of the 9 to 5 madness – you know this, all too well. One fact that you may not be aware of is that driving during hectic rush hour can potentially, cost you more on your auto insurance.

Insurance companies use many different factors to determine your premium rates. Your insurance premiums are based on personal facts about you and other drivers in your household. These facts include your age, gender, your driving history and credit information and the ages, gender and driving history of everyone who will be listed on the policy, as well.

Insurance providers use this information (as well as, information including, the make, model and year for any vehicles that are listed on the policy) and compare the risk to insure you, in order to calculate your rates. For instance, an 18-year old male who drives a brand new (and very expensive) sports car would be considered a very high risk to insure. Therefore, his rates would be on the higher end of the scale, especially compared to a more experienced female driver in her 40’s that drives a five-year old minivan. 

Another aspect that may affect your rates is your location, especially because it determines how much you will drive. The less time you spend on the road – the less of a chance you will have of being involved in an accident, therefore, it lowers the risk to your insurance provider, leading to lower rates for you. However, if you are on the road quite a bit or you have a long commute that forces you to drive through rush hour traffic – your rates will be higher, just because you are around more cars and the risk of a claim is greater.

The good news — for all of you who spend a lot of time behind the wheel during rush hour — is that there is a new insurance option that allows you to bypass these higher insurance rates. This type of auto coverage is known as, Pay As You Drive (PAYD) insurance or Usage based insurance. Pay as you drive insurance utilizes different factors than traditional insurance to calculate your rates. Rather than calculating your rates based on such factors as, your driving history – PAYD insurance uses factors including, the type of vehicle you drive – compared with the distance you drive, the places where you drive and the times you are behind the wheel to calculate your rates.

How Does it Work?

The cost for Pay As You Drive insurance, in its simplest form, is based on the number of miles you drive. However, the primary concept of PAYD insurance calculates your insurance costs not only on how much you drive, but also when and where you drive. There are basically, three types of Pay As You Drive insurance:

  1. Your rates are based on your vehicle’s odometer reading.
  2. Your rates are based on the amount of time (in minutes) that the vehicle is in use. This information is transmitted to the insurance company via RF technology or cell phone.
  3. Your rates are based on information that is collected from the vehicle such as, the time of day you are driving, the speed you are driving, the amount of time on the road and the distance traveled.

In addition, the formula used to calculate your rates can include the amount of miles you drive, can be based on the type of vehicle you will be driving and/or the driver’s identity. After you have established the basic principle of this type of usage-based insurance, you can always discuss further details later, including adding a risk premium for driving too long, using your mobile phone while driving and traveling at excessive speeds.

The last two insurance types, where vehicle information is transmitted automatically to the system is known as, Telematic usage-based insurance. Telematic insurance offers much more updated and immediate changes to the cost of insurance, which means that drivers will have a much greater incentive to drive safer (and under safer conditions).

Overall, Pay As You Drive insurance is the ideal key to combating the high costs of driving during rush hour.

Leave a Reply