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 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. Car subscriptions combine applying for financing, securing insurance, or deciding where to go to get their vehicle serviced, all of these into one monthly payment.
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 purchase an umbrella policy, or if you don't have health insurance, you may want to increase the oft-included $5,000 coverage for medical payments.
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.
Fleet car sharing
Fleet car sharing is when one company (Zipcar is one popular example) buys, maintains and insures a group of vehicles. The cars are then rented by customers, who can "rent" the car for the day or longer, and the car can be picked up in one location and dropped off in another.
This type of arrangement involves individual car owners to rent their cars out to others via a third-party mediator. Like fleet-car sharing, the contracts include some insurance, but it only pays out after any applicable insurance the driver owns maxes out on a claim. Car sharing can impact your auto insurance if you plan to rent out your car to others.
Non-owner car insurance
To fill gaps in coverage, 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.
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 8% of their total cost.
Enter pay-per-mile insurance, one of two options targeted at limited-mileage drivers.
Currently offered by companies like 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.
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.