Black box car insurance

Black box insurance is a form of car insurance cover that bases its premiums on how you drive your vehicle; how safely you drive has a large impact on how much you will pay for your insurance policy.

In this form of policy, your insurance provider is able to track your driving style via a small 'black box', or telematics device, that is installed in your vehicle. This device records information about how you drive your car, which is then transmitted to your insurer.

Your insurer can then use this data to build an accurate profile about your driving style, and can then use this to adjust the cost of your car insurance accordingly.

It's quite straightforward - the better a driver you are, the lower your insurance premiums will become.

As your premium will be based on your personal abilities and tendencies - rather than national statistics - a black box insurance policy is seen as an effective way of communicating to your insurance provider how good a driver you are (and that you should be qualifying for cheaper insurance!).

Black box insurance policies are often referred to as:

• Telematics insurance

• Usage based insurance

• Pay as you drive

• Smart box insurance

A black box policy is different to a standard car insurance policy in that you only see the benefits of it following a multi-step process.

Step 1 - Installation

When you sign up for a black box car insurance policy you will need to have a telematics device installed in your vehicle.

Depending on the device used by your insurer, this device can either be installed by yourself (via your vehicle's OBD port) or by a mechanic (which your insurance provider should arrange).

Typically, you will be insured as soon as you purchase your policy, even whilst you're waiting for your black box installation. However, you should always check this with your insurer as all policies will vary. 

Step 2 - Record data

Once the black box has been installed in your vehicle, it can start recording the data that will be used to build a profile of your driving ability.

To do this, your black box device will collect data on the following whilst you're driving:

• Mileage

• Adherence to speed limits

• Braking

• Cornering

• Acceleration

This data is then transmitted to your insurer. They can then build an accurate profile of how you drive your vehicle.

Step 3 - Premiums adjusted (or not)

After a sufficient period of time, your car insurance provider will be able to use the data it has collected to give you a 'driving score'. This driving score indicates how risky you are to insure.

If you have been driving carefully, i.e. keeping within speed limits, not driving too often, and not accelerating faster than need be, it is likely that your insurer will lower your premiums.

But if you have a penchant for speeding, accelerating too fast, and driving every day, you might see your premiums going up.

It is important to keep a track of how well you drive when you have a black box policy. Many insurers now provide helpful mobile apps through which you can easily track your driving score, and get tips on how to improve it further.

Benefits of a black box policy

• Get lower premiums - If you drive safely on a regular basis, data from your black box will indicate to your provider that you should be rewarded with a lower insurance premium.

• Get tips on how to improve your driving - With the smartphone app that many insurance providers now offer, you can see where you can work on when driving your car.

• Can be used as evidence in an accident - If you are involved in a traffic collision, you could use data from your black box to prove you were driving at the correct speed limit.

• Useful as an anti-theft device - Black boxes often come with GPS tracking, so if your vehicle were to get stolen you will be able to locate your vehicle.

• Get rewarded for not driving - If you don't drive often, then your insurance premium could go down. The less time you spend on the road, the less you are likely to have an accident.

Disadvantages of black box insurance

• You can end up paying more if you are a 'bad driver' - You could end up with higher premiums if your driving score goes down.

• Hidden fees - Some policies come with hidden additional fees, such as a fee to install the black box device, having it removed, and so on. It is worth double-checking all the fees that could be incurred before you take out a policy.

• The more you drive, the more you could pay - If you drive a lot, it might be worth looking into a car insurance policy without a black box. Black box insurance encourages low mileage, and at non-peak times, so if you drive more than the average driver it might be worth staying away from black box technology.

Black box cover is a popular method of insurance for drivers who are part of a demographic often considered a high risk for insurers (for example, young drivers). It allows those who do not have an extensive no claims history to prove to their insurance company that they are a safe driver.

Although they are mostly associated with new drivers, they are not only available to them; any driver can get a black box insurance policy for their vehicle these days. In recent years it has become quite a popular way to help reduce car insurance premiums, no matter a driver's experience.

If you are a young driver looking for insurance, taking out a black box insurance policy is one of the surest ways to save money on your cover, requiring you to simply drive carefully and responsibly, and enjoy reduced premiums as a result.

You may need to wait for a year or so for your premiums to go down, as the insurer needs time to build up a profile of you as a driver, but once they do you can expect rates reduced by a third or more.

However, if you feel that you are likely to have a particularly high annual mileage, or to drive often at peak times (which will be defined by the individual insurer), then a car insurance policy without a black box might be more suitable.

This is often the case for experienced, middle-aged drivers who are likely to experience low premiums anyway and are thus not particularly likely to benefit from telematics technology. 

This largely depends on the provider you go with and the policy you take up. However, some rules that are often associated with black box policies include:

• A driving curfew, meaning you cannot drive between certain times (for example, during rush hour or at night time).

• A mileage limit, meaning that you will be limited to a certain number of miles per month or per year.

Be aware, if you decide to have a black box installed in your car you might not have to adhere to rules like the above. This is wholly based on the black box insurance policy you choose to take out; some will have rules like the above, but many will not.