Black Box Car Insurance

Black box car insurance rates are based on driving performance that is measured with a device you install in your car. Black box insurance companies will each have different rules. If you are considered lower risk, black box car insurance quotes will be lower.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 20, 2021

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Here's what you need to know...

  • This article discusses the “black box” that you allow an insurance company to install on your vehicle to monitor your driving habits
  • Black box insurance is the most personal type of coverage available
  • If your driving history recorded on the black box is less “risky” than the average, you can expect to see a decrease in premiums

A black box.” While many use the term to describe a flight recorder, a black box is an intelligent and complex device that records information that the user cannot modify.

Since the black box is capable of holding important information, insurance companies are now implementing new programs that give their customers the option to have a special black box installed in their car in an effort to lower their rates.

This tiny little electronic device can finally show the insurer that you are a safe driver and a “good risk.”

The insurance marketplace is truly a complex place where insurance actuaries and underwriters research data, gather statistics and try to find the most accurate ways possible to predict the likelihood that a household will file a claim.

No matter how long an insurance actuary spends number-crunching and analyzing policy pricing when insurers operate under a traditional rate calculation structure, the underwriter still must trust what the applicant puts on their application in terms of their driving and usage habits.

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One of the best alternatives that have now been developed is black box insurance, which uses telematics to deliver driver-centric rates that are based on not just the statistics.

If you are tired of paying rates that continue to climb, it might be time to see what driver-centric rates are all about. Read this guide to the car insurance black box and learn just how a device fitted to your car makes a difference.

Why was black box insurance created?

Automatic car keys up close.

Black box insurance, which is often referred to as pay-as-you-go car insurance, is becoming all the new craze as drivers continue to search for premiums that are personalized.

One of the most common complaints concerning rates is not that they are too high, but instead, that rates are based on the actions of others and not on the policyholders themselves.

Drivers were tired of being charged high rates for being in a zip code where claim rates are high when they never filed a claim.

Instead of forcing a driver to compromise their coverage level, the driver now has the option to sign up for this program where the insurer installs a device that will record mileage, driving habits, and more.

The solution to the problem was developed as a new way for consumers to save.

The program was very small in the past, but now with the advancements in technology and the affordability of these devices developed by tech giants, bigger insurers are beginning to adopt the new driver-centric rate structure.

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How does black box car insurance work?

In order to save money with a black box car insurance policy, you will be asked to sign a document that gives the carrier the permission to fit a telematics black box in the covered autos so that the carrier is able to assess your driving behavior at all times.

The actual device is small, tamper-proof, and will not interfere with the normal operations of your vehicle. As the data is gathered based on your driving habits and usage patterns, the information will automatically be submitted to the insurer for review.

Fitting the Telematics Device

Your insurer will arrange for your black box to be fitted to your car as soon as you activate coverage. Most companies will come to your home or your job site to install the device during normal business hours.

You should allow about an hour for the installation process, but you do not have to be present the entire time of the fitting.

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Information that is Recorded and Reported

The telematics system will record your vehicle’s movements to assess just how good of a driver that you are. Most people will claim that they are good drivers, but these claims are biased and skewed.

Instead of just taking the word of the driver, the insurer is able to take more calculated risks with the data collected by the device. Here is some of the information that will be evaluated by the company once it is submitted:

  • The time that you drive each day
  • Miles that you drive daily
  • Total number of miles throughout the term
  • Number of long-distance trips taken in your vehicle
  • If you brake quickly or accelerate quickly
  • The speed at which you drive
  • Types of terrain you drive on
  • Area where vehicle is predominantly parked

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Once the Information is Reviewed

student driver taking driving test

If you purchase a car insurance policy with a 6-month term, the rates for that term will stay level until your next renewal. When your policy comes up for an insurance renewal, the policy will be underwritten much like it was when you first bought your coverage.

The underwriter will check to see if there are chargeable claims, new moving violations, and then if there is information that will benefit or hurt your premiums for the upcoming term.

If the information paints a good picture that you drive safely and are less of a risk than the average driver, your premiums will go down.

If the underwriter sees that you are a reckless driver who brakes quickly and drives at the worst times of day, your rates may go up even without any tickets or accidents. This is why black box car insurance is the most personalized type of insurance on the market today.

What factors are used to calculate insurance rates?

Insurers use a long list of factors to determine your rates. These factors are considered whether or not you have a telematics device so you should know what goes into calculating your rates before you start to shop.

Here are some of the factors or determinants that can drive your rates up:

  • Where you live and where your car is stored
  • Your driving record and claims history
  • How often you use your vehicle
  • Your age and driving experience
  • Vehicle type and body style
  • Creditworthiness
  • Insurance history (loyalty and gaps in coverage)
  • Type of coverage

You may be legally required to buy car insurance, but there are several different alternatives to traditional insurance that should be considered.

If you are interested to see how much you would pay for black box insurance, you should start to request quotes on an advanced tool like a rate comparison platform.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!

By using this type of platform, you can see what all of the alternative insurance providers are charging. Enter your information and be honest about usage so that you can save money just for being a responsible vehicle owner who avoids damaging car accidents.



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