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How Does Black Box Insurance Work?

If you are a young driver or you've recently passed your test, you could be facing an eye-watering quote for your car insurance. This is because most insurers base their premium calculations on a block of driver profiles and general statistical evidence - and, unfortunately, young and newly qualified drivers are statistically more likely to be involved in an accident than any other group.

However, black box insurance - also known as 'telematics' or 'pay as you go car insurance'- aims to offer drivers a cheaper alternative by delivering driver-centred premiums based upon actual driving style rather than statistics.

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Telematics policies in detail

Black box insurance works when your car is fitted with a small 'black box' device, about the size of a smartphone, which records speed, distance travelled and the time of day or night that you are on the road.

The device also assesses your driving style by monitoring braking and cornering. It will also record the types of road on which you typically travel, and the times of day and night you tend to drive, to build up a comprehensive profile of you as a driver.

With a device fitted to your car you can access a secure website to find out how you are performing in each category. This will show you if you need to make any changes to your driving style, and will provide tips on how you can improve your driver score and bring down the cost of your insurance.

As a rule of thumb it is assumed that driving fewer miles on less dangerous roads, while also limiting your night time driving, will result in lower premiums. Policies linked to black box recorders charge premiums on a monthly basis, which means the insurer can adjust them swiftly to reward better driving (and punish those who show themselves to be a risky proposition).

However, although your driving can have a direct impact in the cost of your car insurance, it still makes sense to shop around and compare black box insurance quotes - prices will vary from insurer to insurer as each will have different per-mile and peak-time driving charges.

Who benefits from black box insurance?

Anyone who typically pays a relatively high price for their car insurance, such as young or newly qualified drivers or drivers with any claims or convictions, would benefit most from this technology.

This is because premiums are based primarily on a driver's current behaviour, which gives them an opportunity to demonstrate that they are capable and responsible behind the wheel.

In addition to effectively giving drivers a direct say in the cost of their car insurance, it is hoped that telematics technology will help to improve overall standards by rewarding safe driving with cheaper insurance premiums. Careful drivers may also be given incentives such as 'bonus miles' so they can drive more often on with no increase in future policy price.

In short, if you are a considerate driver that stays away from the more hazardous roads, you should see a reduction in the price of your policy.

Furthermore, if you can limit the amount of driving you do, particularly at night or at peak times, you should also see a reduction in the price of your policy.

Again, to get the full benefit from a black box insurance policy you should shop around to find the cheapest quote for your circumstances as different insurers will operate different pricing approaches for off-peak driving.

So what are the drawbacks?

Although black box insurance seems like a much fairer system, it's not without its drawbacks. One is that you could have the cost of the 'black box' and its installation added to the cost of your cover. However, it is unlikely that this will outweigh the potential savings.

Another drawback is that, if you cover a lot of miles, say during a lengthy commute to work and back, you may not see any savings at all - and may even end up paying more than if you had taken out a traditional policy.

In addition, if it turns out that you are not as safe and considerate a driver as you first thought, you may also end up paying more for your cover. However, the way the system works means that you would at least have a chance to put this right.

And while it may seem a little unsettling to have your every move tracked via satellite, this can have its advantages. For instance, it can pinpoint blame if you are involved in a collision or can even trace your vehicle if it is stolen.

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Pay as you go car insurance can be a great way to reduce your premium if you are a young or newly qualified driver, or a driver with a motoring conviction, and you're not going to drive a great number of miles annually.

However, if you are not in either of these groups, or you cover a lot of miles over the course of a year, black box insurance might not be right for you and might actually increase your premium.

That said, it is still worth considering, so it is worth getting a quote from MoneySupermarket to see if it has a positive impact on the cost of your renewal.

If you find that telematics insurance is not for you then there are still a number of ways in which you can cut the cost of your car insurance, the easiest of which is to use MoneySupermarket's comparison tool to find the cheapest quote to suit your circumstances.

You can also bring down the price of your premium by taking a 'pass plus' advance driving course, or adding an older, more experienced driver on to your policy. Click here to find out more ways to reduce the cost of your car insurance.

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