What is a Good Driver Discount?
Auto insurance companies profit by collecting more money in premiums than they need to pay in claims. This is only possible if the vast majority of insured drivers rarely or never get into accidents. The higher the number of collisions a driver has, the more they have cost the insurance company throughout the years and the less profit they will net. On the other hand, drivers who maintain auto insurance for many years without ever filing a claim are very valuable to insurance companies.
In order to reward these responsible drivers, most insurers offer some form of discount to safe drivers. In some cases, this may be in the form of low rates; drivers without accidents will simply pay less than drivers who have accidents. In other cases, the insurance company may have additional incentives, such as a deductible reduction program. Regardless, maintaining a good driving record is the best way to keep insurance premiums low.
Why Auto Insurance Companies Like Safe Drivers
Some people habitually behave in ways that are likely to cause accidents. These could include speeding, failure to obey traffic laws, drinking and driving or simply being inattentive. Drivers who engage in these behaviors put themselves and others at risk.
An insurance policy is a contractual agreement between the insured and the insurer. The insured pays premiums regularly and on time; in exchange, the insurer pays for damage or injuries caused in an auto accident according to the coverage the insured has purchased. This must occur every time a driver is involved in a collision.
After an insured gets into an accident, an insurance company pays for the damage the driver causes; they may also be responsible for paying for damage to the insured’s vehicle. Because the cost of auto repairs can be quite high, even small claims can quickly add up to many thousands of dollars. If an insured’s policy costs around $1,000 each year, it could take several years just to pay for the damage caused in a single accident. Multiple accidents in a small stretch of years can lead to insurance companies losing a substantial sum of money.
Because insurance companies must protect their own financial interests, they will increase the premiums for drivers who are involved in accidents. If the accidents become common or severe enough, the insurance company will sever ties with the insured, who must then obtain coverage from another company.
Losing customers in this way is unpleasant both for the insured and the insurance company, and insurers would rather avoid the problem altogether than constantly cancel policies. In order to entice good drivers to approach their company and stay faithful, insurers offer various safe driver rewards programs.
What Constitutes a Good Driver?
At its most basic, a safe driver reward program applies to any driver who drives without accidents for a specified amount of time. Most people fall under the classification of “good driver” most of the time; for most individuals, auto accidents are an extremely rare occurrence. This is fortunate, as it means that most people will be able to enjoy low insurance rates.
- Other factors may lead to further savings such:
- If the driver has taken any advanced driving courses, such as defensive driving
- If the driver has no history of speeding tickets
- If the driver has no history of traffic violations such as following too closely
- If the driver has never been convicted of drunk driving
- If the insured vehicle has any safety devices installed
In some cases, still more factors may be assessed, such as how many miles the insured drives per year and what times of day the insured drivers the most. Be sure to ask your insurance company exactly what factors are included in your safe driver discount so that you can proceed accordingly. For example, you may wish to enroll in a defensive driving course if doing so will provide you with a discount.
What types of Safe Driver Discounts are available?
There are basically three types of safe driver discounts:
– Basic Flat Discounts
These calculate the average cost of an auto policy and then offer a discount of a set figure or percentage. In many cases, an insured will not realize that they are receiving this discount; it will simply reflect as their base premium cost. Most people do not see the full effect of this discount until after they’ve had an auto accident. The dramatic increase in insurance premiums after an accident is caused more by the loss of a discount than an actual rate increase.
– Deductible Reduction
Allstate is the best known of the companies that offer deductible reduction programs to insureds, but there are companies offering similar programs. Allstate’s program, called Your Choice Auto, subtracts $100 from the insured’s collision deductible for each year of accident-free driving. This program also provides accident forgiveness by ensuring that the insured’s rates will not increase as a result of an accident.
– Yearly Reimbursements
Some auto insurance companies provide a yearly rebate as a thank-you for safe driving. This rebate may be applied directly to the policy, or it may be sent as a check to the insured. These checks often arrive at the end of the policy’s term or the end of the fiscal year.
Another way that safe driving can lead to a reduced-cost insurance policy is if an insured enrolls in a pay-as-you-go insurance plan. Progressive started this with its Snapshot program, but Allstate and several others have begin using these types of policies as well. Rather than rely on an insured’s driving history to determine how well an individual drives, the insurance company actually installs software in the insured’s vehicle that tracks their driving habits. Drivers who abide by certain safety measures pay lower rates than those who engage in risky behavior.
No matter how the safe driving is assessed, driving accident-free is the best way to keep insurance premiums low. Maintaining safe driving habits not only reduces your insurance costs, it also reduces your risk of being injured in an auto accident or causing damages to someone else. By keeping an eye on your driving habits, you can do your part to make the road a safer place.