Car Insurance

Why You Should Let Your Car Insurance Company Ride Shotgun

Tired of paying too much for your car insurance? If so, you're not alone.

According to J.D. Power, car owners got hit with average increases of 35 percent -- $153 -- on their car insurance premiums last year. And that was up from an increase of $113 in 2012.

As rates reach for the sky, more car owners are reaching out for options to control their costs. And according to consumer financial website NerdWallet, one option you should look hard at this year is usage-based, or "pay-as-you-go" car insurance.

The 411 on Usage-Based Insurance

Usage-based insurance is a relatively recent innovation. The National Association of Insurance Commissioners describes it as a way to align the premiums that drivers pay with the amount and manner they drive, "making premium pricing more individualized and precise."

The basic idea is that the less you drive, the less chance your car will be damaged while driving -- and so the less you should pay to insure against the risk of such damage. Similarly, the better you drive -- e.g., by driving "gently," obeying the speed limit, and neither accelerating nor braking too precipitously -- the less you should be charged.

The question is how to prove to an insurance company that you drive little enough, and well enough, to deserve a discount. And the answer to this question is telematics.

Big Insurer is Watching You

Telematics refers to new advances in technology that permit an insurer to monitor how a driver drives. It basically boils down to you, the driver, permitting your insurer to install a GPS monitoring device in your car that records how the vehicle is driven over a period of time.