Consumer Reports: Usage-based car insurance

If you're a safe driver you could be saving money on car insurance, but there is a trade-off if you want those savings.

It's called usage-based insurance, drive safely and keep to certain mileage limits and you could save a bundle on premiums. But it also means having your insurance company track how you drive and that could drive you up the wall.

Roger Lane recently signed up for usage-based car insurance.

"I decided to do it really for the saving," Lane said.

He's hoping to save 20 to 30-percent off the $2,500 he's been paying yearly on premiums. But with a tradeoff: Drive safely and log fewer miles.

Numerous major insurance companies like State Farm, Nationwide, Allstate, and Liberty Mutual, offer the program.

Using a smartphone app and a tag or dongle, insurance carriers monitor acceleration, braking, cornering, speed, and phone use and provide a score.

If your score indicates low risk driving, your premiums could be reduced significantly, in some cases up to 50-percent.

"I think that this gives an extra impetus to really follow speed limits," Lane said.

To get the discount, you'll also need to watch how far you drive. State Farm for example, considers 7,500 miles a year or less low mileage.

But if your driving suggests risky behavior, some insurers could charge you even more. And while some companies say they don't share your information, for some people, privacy may be a concern.

"If you're in an accident, your information can be used, for example, by law enforcement," said Consumer Reports Money Editor Tobie Stanger.

"I don't have a problem with that," Lane said. "I have a cell phone as it is, so the fact that I could save money by being watched is acceptable."

To keep your car insurance costs low, make sure you're taking advantage of all available discounts.

Ask about discounts for the safety and security features built into your car, good student discounts, even discounts for maintaining a good credit score!

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