If you’re looking for car insurance rates that reflect your actual good driving skills, usage-based insurance (UBI) might be a good fit. UBI is an option offered by many auto insurance companies that tracks your driving and could result in cheaper car insurance—if your driving scores well.
The rising cost of car insurance is one reason why you may be interested in usage-based insurance, which can lead to lower rates.
How Does Usage-Based Insurance Work?
Usage-based insurance programs collect vehicle “telematics” data that comes from cellular, GPS or other technology. These programs track certain driving behaviors such as:
- Speed
- Acceleration
- Hard braking
- Hard cornering
- Miles driven
- Time of day
- Phone use while driving
The technology used to track your car’s telematics data depends on your car insurance company. Generally, driving data is collected in one of these ways:
- Through a smartphone app.
- Through systems built into your vehicle, such as OnStar.
- Through a device plugged into your vehicle’s on-board diagnostics (OBD-II) port.
How your driving habits affect your car insurance rates will depend on your insurer, but in a typical UBI plan, your driving is tracked over a certain period of time. After you complete the initial review period, you may be offered a discount based on the telematics data and your driving score.
Traditional auto insurance pricing factors are also still generally built into your rate, such as your driving record, credit, vehicle type and location.
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Overview of Usage-Based Insurance Discounts
| Company | UBI program name | UBI sign-up discount | UBI maximum possible savings | Could bad driving result in higher rates? |
|---|---|---|---|---|
| Allstate | Drivewise | Varies by state, up to 10% | 40% | Yes |
| Direct Auto | DynamicDrive | 10% | Varies | Yes |
| Farmers | Signal | 5% | 15% to 30% | Yes |
| Geico | DriveEasy | Varies by state | Varies by state | Yes |
| Mercury | MercuryGO | 5% for adults, 10% for teens | 40% | No |
| Nationwide | SmartRide | 15% but can vary by location | 40% but can vary by location | No |
| Progressive | $94 average sign-up discount | $231 average program discount | Yes | |
| State Farm | Drive Safe & Save | 10% | 30% | No |
| Travelers | IntelliDrive & IntelliDrivePlus | 12% with IntelliDrivePlus | 30% | Yes, in some states |
| USAA | SafePilot | 10% | 30% | No |
| Westfield | MissionSafe | 10% | 40% | No |
What to Find Out Before You Sign Up for Usage-Based Insurance
Many large auto insurance companies offer usage-based insurance, but it may not be available in every state.
Before you sign up, make sure you understand the program’s rules. You’ll want to know exactly what driving behaviors are being measured and whether your rates could go up.
There are some other quirks to be aware of. If your UBI program uses your phone to track driving behaviors, you need to know how the app works and if it tracks you as a passenger. For example, with Travelers IntelliDrive, you have 10 days to change driving information in the app if the app incorrectly records a trip in which you were a passenger, not the driver. You don’t want someone else’s bad driving scored against you.
You also want to know the consequences of opting out of the program. With some programs, such as Nationwide SmartRide, you’ll complete a four- to six-month evaluation period, but you’ll keep whatever discount you earn for as long as you insure your car with Nationwide.
And make sure you know whether your rate could go up if your driving doesn’t score well.
Is Usage-Based Insurance Worth It?
Usage-based insurance may be worth it if you’re a really good driver because it could save you money. But it doesn’t work out that way for many. According to a JD Power auto insurance report in 2022, over 40% of consumers who enrolled in a UBI program saw their rates increase.
UBI could also be worth it if it makes you more aware of improving your driving in general.
But there’s the growing matter of the privacy of your vehicle and driving data, as shown in articles such as the New York Times’ “Your Driving, Tracked” (June 9, 2024) and “Automakers Sold Driver Data for Pennies, Senators Say” (July 26, 2024).
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Usage-Based Insurance Frequently Asked Questions (FAQs)
What’s the difference between usage-based insurance and pay-per-mile insurance?
Usage-based auto insurance tracks driving actions such as speeding and harsh braking. Your car insurance premium is adjusted (often in the form of discounts) based on how well your driving scores.
By contract, a typical pay-per-mile insurance policy calculates a base rate and a per-mile rate. For example, a pay-per-mile plan might have a $30 per month base rate and a $0.06 per-mile rate. So if you drove 500 miles in one month, your premium would be $60 ($30 monthly base rate 500 miles x $0.06 = $60).
Can I get a good driver discount without participating in a usage-based insurance program?
Many insurers offer car insurance discounts for safe drivers. If you drive without incident for a certain amount of time, meaning no car accidents or traffic violations, you’ll typically qualify for a good discount. The amount of the discount varies by insurance company, but usually ranges anywhere between 10% to 40%.
What other ways can I save on car insurance for being a safe driver?
Your car insurance company might reward safe drivers in other ways. For example, some insurers offer diminishing deductible car insurance. Sometimes known as a “disappearing deductible” or “vanishing deductible,” this is a perk that decreases the amount of your deductible if you maintain a clean driving record over time.
For example, if your program shaves off $100 every year for safe driving and you have a $500 deductible, you could get your deductible down to zero for five years of safe driving.
But some companies charge extra for a diminishing deductible, which may not be worth it.
