What is Black Box Car Insurance?

If you’re a safe driver and feel like you’re paying too much for your car insurance, the answer might be to explore black box car insurance. Black box car insurance, sometimes referred to as telematics insurance, is a type of car insurance with rates based on your driving. 

The goal of black box car insurance programs is to learn more about each policyholder’s driving habits and to price premiums accordingly. This system rewards vehicle owners who can prove that they drive responsibly and are less of a risk to insure. 

Is black box car insurance right for you? Find out now with Benzinga’s guide.

What is a Black Box Car Insurance Policy?

A black box car insurance policy is any type of insurance program that collects your driving data and returns it to the insurance company. The name “black box” comes from the hardware that is typically installed in your vehicle, though some companies use a smartphone app in lieu of physical hardware.  

Key Points

What is Telematics Insurance?

Telematics insurance is a type of insurance policy that bases your rates on data gathered during your driving. Insurance companies that offer telematics insurance policies install a physical device or instruct you to download a smartphone app linked with the company. When you drive, the device or smartphone app tracks your driving habits and converts this data into a score that represents your driving as a whole. 

The tracker then relays this information to your insurance company, where underwriters receive it and use the data collected and score to determine how much you’ll pay for your auto insurance. If your score is better, your insurance provider will lower your rates. If it’s higher, your insurance company may raise your premium.  

How Does Black Box Car Insurance Work?

Black box car insurance works using GPS and other types of wireless communication systems. If you have a smartphone app instead of a black box installed, you may need to activate the device each time that you drive. 

As you drive, your black box device collects data, and it relays it back to your insurance provider. Some of the metrics that your black box can track may include:

• Your driving smoothness
• How often you brake and accelerate your vehicle
• How fast you usually drive
• What time it is when you usually drive
• The duration of your average trip on the road
• How many miles you drive per day and per week
• The roads that you usually travel on
• How sharply you turn corners

If your black box rates you highly, it’s likely because you practice safe driving practices every time you hit the road. Your insurance provider will usually give you a set time that you’ll need to keep your black box or tracking app active—long enough to get an idea of your driving habits.

Pay As You Drive Insurance

If you don’t drive very often, you may be able to save money with a pay as you drive insurance policy. As the name suggests, pay as you drive insurance charges you based on the number of miles that you drive. A black box installed in your vehicle, or a smartphone app installed on your phone, tracks your mileage and relays the data back to your insurance company.

You may pay a daily base fee and a per-mile rate for each mile you drive. This means that the less you drive, the less you’ll pay for insurance. Low-mileage drivers can often save money with a usage-based policy.

Assessing Risk

Black box technology provides insurance providers with real-time data on your driving habits, which provides the insurance company with a more in-depth look at how safe you are to insure. This is a benefit for both you as the driver and the insurance provider if you’re a great driver, as the insurance company can incorporate your personal data into your premium price.

How do Insurers Use Black Box Technology for Your Car Insurance?

Insurance companies use black box technology to assess how much of a risk you are to insure. If your black box registers that you speed, make very sharp corners and drive often, you might be more likely to be involved in an accident. This increases the risk that the insurance company takes on when they issue you an insurance policy, which raises your rates. 

On the other hand, if your data proves that you’re a responsible or infrequent driver, you’re less of a risk to insure. This allows the insurance company to offer you a more affordable insurance policy.

Risks Involved With Black Box Insurance

There are a few risks that come with black box insurance, which you should be aware of.

• You may inadvertently raise your rate: Though no one believes that they are a bad driver, some drivers have more of a tendency to speed or suddenly brake. If you’re a relatively new driver or you know that you have trouble following speed limits, you should opt out of black box insurance.
• Privacy concerns: Some drivers avoid black box insurance for privacy reasons. You may not be comfortable with your insurance company monitoring where you’re going and when, and there is no guarantee that your insurance company’s system won’t be hacked. Your insurance provider may also sell your data to third parties.
• Inaccuracies in reporting: Your black box doesn’t have a camera—it can only track data points. This means that your black box will penalize you when defensive driving is necessary. For example, if another driver swerves in front of you and you’re forced to make a sharp turn, your black box will register this as unsafe driving.

Advantages of Black Box Car Insurance

If you know that you’re a great driver, you can claim a number of benefits by opting into black box insurance.

• More affordable insurance: The most obvious benefit of opting into a black box insurance policy is that you can save on insurance by providing that you’re a responsible driver.
• Encourages you to be mindful of driving laws: When you have a black box installed in your vehicle, you’re much less likely to attempt to run that red light or check your text messages while on the road. More mindful driving decreases the possibility that you’ll be involved in an accident.
• Helps track stolen vehicles: Black box insurance relies on GPS technology. If your vehicle is stolen, your insurance company can use the GPS data from the black box to assist police in finding your vehicle. 

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Are you currently driving without state minimum auto insurance? If you are, you could be putting yourself at risk of a very expensive fine or even having your license suspended — not to mention the astronomical legal and medical expenses you might be left with if you’re involved in an accident without insurance.

Even if you already have auto insurance, you might want to regularly collect quotes from multiple providers to see if you can secure a lower rate with another company. Start exploring your insurance options now with Benzinga’s simple car insurance quote tool here.

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