Disruptions to Driving and Auto Insurance, and What They May Mean to Your Coverage and Costs

Virtually unchanged for decades, the options for making the mundane daily commute have begun to multiply, many of them in ways that promise to make traveling less of a chore for drivers. It isn’t just the continuing rise of ride-sharing services like Uber and Lyft. A handful of emerging options for getting to and from work promise to disrupt personal driving, just as ride-sharing has upended the taxi and limousine business. And that’s without even considering the true revolution in driving: the expected rise of autonomous vehicles.

As driving changes, though, so does auto insurance--or it should, at least. Here’s a rundown of some disruptive new options for driving, or insurance, or both, and what they may mean for your coverage.

Car Subscriptions

Car subscriptions are a modern twist on the long-time option of a car lease. A select few auto manufacturers--including Volvo, Ford, Chrysler, and most recently BMW and Mercedes-Benz--now offer subscriptions that roll together paying for the car, its insurance premium and the cost of maintenance. Drivers need no longer have to worry about applying for financing, securing insurance, or deciding where to get their vehicle serviced. Car subscriptions combine all of these into one monthly payment.

For example, the Care by Volvo subscriptions include a personal insurance policy through Liberty Mutual, with coverage for bodily injury, property damage, uninsured and underinsured motorists, and medical expenses.

One risk to a subscription is that it may lull the car buyer into paying less attention than they should to the details of its components, which could be a poor choice when it comes to its insurance coverage. Keep in mind that you don’t have to limit yourself to what subscriptions offer, and that you can increase coverage as needed, either at inception or later, should your needs change. Depending on the assets held in your name, for example, you may need to increase the liability limits of your policy or purchase an umbrella insurance policy. Or if you don’t currently carry health insurance, you may need to reconsider or increase the typical $5,000 of included coverage for medical payments.

Car Sharing

Car sharing allows drivers to rent a vehicle any time of day, and pay only for the length of time it’s used and the distance it travels. There are currently two types of car sharing services.

With fleet car sharing, the more familiar variety, one company, such as Zipcar, buys, maintains, and insures a group of vehicles. Depending on the company, the cars may be available in one city or considered to be free-floating--so you can rent in one city, say, and drop off in another. The second type is peer-to-peer sharing, in which individual owners rent their vehicles to other individuals with help from third-party mediator, such as Getaround. Both options include some insurance, but as a renter, the included coverage is secondary to your personal auto insurance, meaning it only pays after any other applicable insurance you have maxes out on any claim.

That arrangement can leaves gaps, especially for those who don’t have an auto insurance policy on another vehicle. To fill them, drivers who often use sharing should consider non-owner car insurance. Non-owner car insurance is designed for individuals that don’t own their own vehicle but need liability protection when they drive. Some policies also offer medical expense and uninsured/underinsured motorist coverage. To determine how much coverage you need, check what the car-sharing service provider includes and what you are still responsible for as a participating renter.

Pay-per-mile

Driving habits are changing, especially in the millennial generation. According to experts, millennials are driving fewer miles, a trend that’s predicted to continue as transportation options multiply, driven by technology. While many insurance carriers already offer discounts for owners who drive their vehicles less than 7,000 miles a year, this typically lowers the premium by only about eight percent.

Enter pay-per-mile insurance, one of two options targeted at limited-mileage drivers. Currently offered by Metromile, this insurance bills you monthly based on the number of miles you drive, plus a monthly base rate. If you don’t drive at all one month, you only pay the base rate (typically around $30). At the opposite extreme, if you take a long road trip, you may economically max out your payment, because you aren’t charged for miles in excess of 250 in a single day. The coverage includes bodily injury, property damage, collision, comprehensive, underinsured/uninsured motorist, medical payments, rental reimbursement, roadside assistance and you can choose from three deductible amounts.

Before making the switch, drivers should be certain their driving habits won’t change, since this option only significantly benefits people who drive infrequently.

Pay as you drive

Pay as you drive or usage-based insurance models such as Snapshot, from Progressive, rely on a telematics device installed in your vehicle to track driving habits and amount of time traveled. The actual savings offered varies among drivers. There’s also a risk of paying more for insurance if your driving is deemed to be less than stellar, and perhaps even unsafe. This option significantly benefits individuals who are cautious and drive infrequently.