Key Takeaway: Usage-based insurance sets part of your car insurance rate by how, when and how much you drive, and it may be worth it if you drive safely or don’t drive much. Some large insurers say safe drivers can save up to 30%, but some may raise your rate for riskier driving, so check a program’s terms before you sign up.
If you typically drive short distances or stick to the speed limit, for example, you might qualify for a lower premium with UBI than with traditional auto insurance. The trade-off is that your insurer gets a closer look at how you drive, so it’s worth understanding what a program tracks before you enroll.
To see whether you’d qualify for a personalized discount before you choose a program, you can check your driving score in the free Credit Karma app.
- How does usage-based insurance work?
- What are the different types of usage-based insurance?
- What companies offer usage-based insurance?
- Is usage-based insurance worth it?
- How can I find out if usage-based insurance will save me money?
- FAQs about usage-based insurance
How does usage-based insurance work?
While traditional car insurance carriers may look at factors such as your age, location and insurance score to determine your premium, usage-based insurance also considers your driving habits.
UBI can be a win-win for both insurance companies and drivers. Some drivers can snag a lower premium with UBI than with traditional insurance, while insurance companies benefit by motivating policyholders to drive more safely.
With a UBI program, your insurance company will track your mileage and/or driving habits with telecommunication devices called telematics. UBI is sometimes called connected car insurance because data may be collected and sent to your insurance company through a self-installed plug-in device, a smartphone app or equipment built into your vehicle.
The information an insurance company collects is based on the type of UBI program it offers.
What are the different types of usage-based insurance?
Usage-based insurance generally falls into two categories based on what data the insurer prioritizes: pay-how-you-drive and pay-as-you-drive.
What is pay-how-you-drive insurance?
Pay-how-you-drive programs, also known as behavior-based insurance, monitor driving behaviors such as speed, acceleration, braking habits and the time of day you drive. These programs use your personal driving behaviors to help establish your risk profile.
UBI programs that track driving behavior generally collect data for a specific period of time — typically until your next policy renewal — to establish your habits and discount your premium, if you qualify.
Some insurers also give you a discount just for signing up. Liberty Mutual, for example, says it gives a 15% participation discount if all drivers on your policy enroll and 10% if only some do.
What is pay-as-you-drive insurance?
Pay-as-you-drive programs, also referred to as pay-per-mile car insurance or pay-as-you-go plans, track how many miles you drive. With UBI programs that track only mileage, the company will often charge you a monthly base rate plus a per-mile charge.
Keep in mind that an insurance company’s UBI program details may vary by state or not be available in certain states.
What companies offer usage-based insurance?
Here are brief summaries of some usage-based insurance programs.
- Allstate Drivewise — You may get a policy discount or enrollment reward for joining, and safe drivers can earn performance rewards every six months.
- Esurance DriveSense — The app measures a range of driving behaviors, such as miles driven at high speeds, hard braking and major speed changes. Esurance says you get a discount just for enrolling, and once you log at least 50 trips a term, your discount is customized and could go up or down.
- Liberty Mutual RightTrack — The program looks at braking, acceleration and the time of day you drive, and your results are applied to your premium at each policy renewal.
- Nationwide SmartRide — The app measures miles driven, hard braking, acceleration, idle time and nighttime driving.
- Progressive Snapshot — The Snapshot device or mobile app tracks your mileage, the time of day you drive, how you drive and, in some states, phone use while driving to calculate your premium.
- State Farm Drive Safe & Save — The mobile app measures mileage and behaviors like acceleration, braking, cornering, speed and distracted driving.
- Travelers IntelliDrive — The app captures the time of day you drive, along with your speed, acceleration, braking and distractions.
Check with your insurance agent or the insurance company for more details on these programs.
Is usage-based insurance worth it?
Usage-based insurance may be worth it if you have safe driving habits or don’t get behind the wheel often. But some insurers may raise your premium if the data shows riskier driving. Think about these factors to help determine if a usage-based insurance program might be a fit for you.
Your driving habits
If you’re a safe driver, you may be able to get a lower premium with a UBI program. Your insurer may combine your driving data with the traditional factors it already uses, such as your driving record.
When shopping for a UBI policy, look at all of the factors each company monitors and weigh them against your driving habits. For example, if you drive to a late-shift job every night, you may not save much money (or any at all) with a UBI plan that measures the time of day you’re driving — some insurance companies consider daytime driving to be safer.
How comfortable you are with data collection
You should also consider whether you’re willing to trade some privacy for potentially lower premiums. Having your driving habits, mileage and phone use monitored may or may not be worth the potential savings for you.
Before you sign up for a UBI program, make sure you know exactly what the plan monitors and who — if anyone — the company shares the data with.
How can I find out if usage-based insurance will save me money?
You can check your driving score in the Credit Karma app before you choose a program. The app monitors your driving in the background and lets you know if you qualify for a personalized discount, and you can see rates that consider your actual driving behavior without negatively impacting your existing rates.
If you’re a safe driver who works remotely, has a short commute or logs low mileage in general, usage-based insurance could help bring down your auto insurance rates.
Consider shopping for new usage-based car insurance the next time your current policy renewal date comes up. To take advantage of competitive rates,
you should shop for car insurance at least once a year.
By shopping around and comparing car insurance programs, you’ll be able to understand what data the insurance company collects, how much you could potentially save and how the program works in your state — information you’ll need to make an informed decision.
FAQs about usage-based insurance
Some programs can. Progressive says your rate could increase with high-risk driving, and Travelers and Liberty Mutual say riskier driving may lead to a higher premium. Rules vary by state: Travelers says riskier driving won’t raise your premium in Washington, D.C., Montana, North Carolina or Virginia.
Yes, at some insurers. State Farm lists a 10% initial participation discount for Drive Safe & Save after setup. Liberty Mutual says it gives a 15% participation discount when all drivers on a policy enroll and 10% when only some do. Progressive says you get an automatic discount for participating in most states.
Yes, many programs do. Washington state’s insurance regulator says insurers may use an app or a device to track where you drive, along with other driving behavior. Some programs limit how that data is used. Travelers, for example, says location data collected in its app isn’t used to set your premium.