Thanks to telematics and other insurance programs like Progressive Snapshot grades, the incentive to be a safe driver is more attractive than ever.
Usage-based insurance (UBI) is a newer form of vehicle insurance that considers extra elements in determining your auto insurance rate, such as how many miles you drive or how safe a driver you are.
If you regularly drive short distances or follow the speed limit, for example, you may be eligible for a lower UBI price than you would with standard vehicle insurance.
What Is Usage-Based Insurance, and How Does It Work?
While standard auto insurance may base your premium on characteristics such as your age, location, and insurance score, usage-based insurance examines your driving behaviors when determining how much you’ll pay for coverage.
UBI has the potential to benefit both insurance firms and drivers by saving money — especially on car expenses for the driver. Some drivers may get a cheaper premium with UBI than they might with conventional insurance, while insurance firms gain from policyholders driving more safely.
Naturally, how much you save varies based on the plan and how you drive, but, on average, you may save anywhere from 5% to 45% on your insurance.
With a UBI program, your insurance provider uses telematics to monitor your mileage and driving behavior. A self-installed plug-in device, a smartphone app, or manufacturer-installed equipment may be used to gather and send data to your insurance provider.
Telematics collects data on how drivers travel using cellular, GPS, and other technologies. It measures the time of day, vehicle speed, miles you drive, and how frequently you brake hard or accelerate quickly. Some also keep track of how much time you spend idling.
The information gathered by an insurance provider depends on the UBI program it provides.
Usage-Based Insurance Options
There are two types of usage-based insurance. One version of UBI tracks driving habits, including miles, time of day, and speed fluctuations. These are known as pay-as-you-drive plans.
The alternative option, known as pay-as-you-go, or pay-per-mile programs, just measure how many miles you travel.
Insurance Policies With Pay-As-You-Drive Option
UBI systems that analyze driving behavior usually gather data for a certain amount of time — usually until your next policy renewal — to identify your habits and, if you qualify, lower insurance rates.
When you join the program, certain companies may offer you a 5% to 15% discount right away. Be aware – some insurance companies may raise your rate as part of their UBI program. Some companies claim that their UBI plans will only lower your premium.
Pay-as-you-go insurance is a kind of insurance that allows you to pay as you go. When you use a UBI program that merely tracks mileage, the provider will often charge you a monthly base cost plus a per-mile fee. But the specifics of a company’s UBI program may differ by state and it may not be an option offered in all states.
Is It Worth It To Get Usage-Based Insurance?
If you have good driving habits, good credit, and don’t get behind the wheel very frequently, usage-based insurance can be worth it.
If you’re a cautious driver, a UBI program may be able to help you save money on your insurance. If you’ve filed one or more accident claims, you may still be able to save money. UBI plans use telematics to assess driving in real-time and may not depend on past data like your driving record.
When looking for UBI coverage, consider all the criteria that each company tracks and compare them to your driving behavior.
For instance, if you drive to a late shift every night, a UBI plan that detects the time of day you’re driving may not save you much or any money at all since some insurance companies consider daylight driving to be safer.
Will My Insurance Always Be Collecting Data While Driving?
Do you know how much car insurance goes up after a speeding ticket? Depending on your state and insurer, it could be between 11% and 26% more expensive. A UBI program can incentivize safe driving practices by rewarding drivers for low-risk behaviors.
With UBI, your driving habits will be monitored consistently. So you should examine if you’re prepared to give up privacy in exchange for possibly reduced vehicle insurance prices.
It’s up to you if having your driving patterns, mileage, and phone use tracked is worth the possible savings. Before you sign up for a UBI program, be sure you understand what the plan tracks and with whom the corporation distributes the data, if anyone.
If you’re a good driver, work from home, have a short commute, or drive infrequently, usage-based insurance might help you save money on your car insurance.
Make sure to browse around and compare programs to see what information the insurance provider gathers, how much you may save, and how the program operates in your state.