You put in the work to be a safe driver, why not be rewarded for it? Usage-Based Insurance (UBI) is one option drivers can pick that saves them more money the safer and less they drive. Understanding this auto insurance option can help lower your annual premium significantly.
Key Takeaways
- Usage-Based Insurance (UBI) is a good option for people who work from home or don’t drive often and practice safe behind-the-wheel habits.
- Drivers can save up to 40% with a usage-based insurance policy.
- Most UBI programs only discount your rates and won’t penalize you for riskier driving, but some will.
What is Usage-Based Car Insurance?
Usage-Based Insurance (UBI) is a type of car insurance that utilizes in-vehicle telecommunications devices (telematics) to track mileage and driving behaviors of users. The main idea behind UBI is for providers to monitor a driver’s behavior to better align them with an insurance rate that fits their driving.
Insurance carriers utilize telematics, whether it be an app on your smartphone or a plug-in device for your car, to gather your driving data. Using this data, insurers will set your premiums month-by-month to accurately reflect your personal driving habits. So, the best discounts will go to the safest drivers with the lowest number of miles driven. And most insurers use this data to calculate discounts, not raise rates!
What are the Advantages of Usage-Based Car Insurance?
The biggest benefit of UBI is the personalization it gives your auto policy. It gives providers access to your individual driving data: hard braking, speed, and time you spend in the car. For lower-risk drivers, this provides a chance to be rewarded for safe driving with lower rates. By incentivizing customers to practice safer driving habits, providers give customers control of their own rates.
In addition to tailoring rates to fit your unique driver profile, UBI has many safety benefits. If your car is stolen, it allows providers to track and recover it. It also improves accident response time, and providers can accurately estimate accident damages by analyzing your data during a wreck.
Overall, fewer miles and safe driver habits contribute to fewer accidents, congestion, and vehicle emissions which benefits society as a whole.
What are the Disadvantages of Usage-Based Car Insurance?
Personalized rates and rewards for good driving could be good for some people, but they also raise some concerns about privacy. Having your insurance company track your mileage, monitor how fast you drive and when you slam on the brakes suddenly can be nerve-racking and uncomfortable for some people. Before proceeding with UBI, decide if this is something you’re comfortable with.
To combat the privacy issue, some states require providers to disclose tracking devices and practices. Some providers even limit the data they collect. Information sharing may not be for everyone, but it is growing constantly through smartphones and social media networks, so adding it to insurance isn’t so far-fetched. If you’re a good candidate for lowering your rates through UBI, considering adding it to your insurance isn’t a bad idea.
What Is The Difference Between Usage Based-Insurance and Pay-Per-Mile Insurance?
The main difference between usage-based insurance and pay-per-mile insurance is the way they lower your auto insurance premium. UBI helps lower your rates through a discount earned for safe driving habits. Pay-per-mile insurance charges you a flat monthly rate, then an additional fee for each mile driven (typically a few cents per mile).
The idea behind pay-per-mile insurance is that the more time you spend on the road, the higher your chances of being in an accident are, even if you are a safe driver. Pay-per-mile is not for everyone and could end up hurting your rates if you have a long daily commute.
- Pay-Per-Mile Insurance: Pay base rate and then a small fee per mile driven, often less than 10 cents.
- Usage-Based Insurance: Sign up for a base premium and qualify for a discount based on safe driving habits. Most drivers save money, very few see raises in rates.
Who Is A Good Candidate For Usage-Based Insurance?
With auto insurance being a requirement in Texas, UBI coverage can be beneficial for people with safe behind-the-wheel habits or those who simply don’t drive often. If you’re someone who doesn’t use their phone on the road, avoids sudden acceleration and braking, you could be saving big. Most UBI programs will not raise your rates for bad driving habits, but some will. Be sure to clarify the details of the program with your insurance agent.
If you work from home or don’t like to drive but still have a car, UBI can help you score lower rates while remaining safely insured. Many major insurers will offer at least up to 20% discount for safe driving habits, with some offering as much as 40% off.
Usage-based insurance might be right for you if:
- You drive less than 13,476 miles per year. That’s the average number of annual miles driven according to the Federal Highway Administration. If you drive more than that average, you probably will not save money on your premium with UBI.
- You drive safely. Because your driving style and habits are tracked, insurers could penalize you for hard braking and speeding. Avoiding these habits increases your chances of receiving a discount.
- Tracking doesn’t bother you. Having daily tracking in your car isn’t for everyone, and that’s okay! Make sure you’re comfortable with your provider collecting data about your car, and possibly location, before deciding on UBI coverage.
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Who Offers The Best Usage-Based Insurance?
There are a lot of options when it comes to auto insurance, and most carriers offer some form of usage-based insurance policy. We broke down some of our top carriers’ UBI policies:
| Provider | UBI Program | Sign Up Discount | Savings (on annual premium) | Metrics Tracked | Increased Premiums for Riskier Driving? |
|---|---|---|---|---|---|
| Nationwide | SmartRide | 15% | Up to 40% | Miles driven, hard braking, acceleration, nighttime driving, idle time | No |
| Allstate | Drivewise | 10% | Up to 30% | Speed, braking, time of day, phone activity | No |
| Progressive | Snapshot | $25-$50 | ~$328/year | Hard braking, acceleration, late night driving, miles driven, phone activity | Yes |
| Travelers | IntelliDrive | 10% | Up to 30% | Time of day, speed, acceleration, braking, distractions | Yes |
| Liberty Mutual | RightTrack | 15% | Up to 30% | Braking, acceleration, time of day | No |
- Nationwide SmartRide: Offers a 15% discount just for signing up. Safe drivers can save up to 40%. SmartRide tracks miles driven, hard braking and acceleration, nighttime driving, and idle time to calculate your savings.
- Allstate Drivewise: Earn a discount when you sign up for the program. Safe drivers can save up to 30%. Tracks speed, braking, time of day, and phone activity to calculate a safe driving score.
- Progressive Snapshot: In most states, get an automatic discount just for participating. To maximize savings, limit hard braking and accelerations, avoid late night driving, drive less overall, and stay off your phone. Snapshot can save you around $328/year, but bad driving habits could cause your premium to increase.
- Travelers IntelliDrive: Safe driving habits could save you up to 30%. Measure time of day, speed, acceleration, braking, and distractions to determine safe driving habits. Riskier driving may result in a higher premium.
- Liberty Mutual RightTrack: Located right in the Liberty Mutual app, RightTrack can save safe drivers up to 30%. Signing up everyone on your premium automatically gets you a 15% discount. Looks at everyday habits like braking, acceleration, and time of day. Also receive helpful tips and coaching to help support safer driving.
Drive Safe & Save With TGS Insurance
TGS strives to make finding the right policy for you easy and fast! We take the hassle of auto insurance shopping out of your hands and find the best auto insurance discounts for you. Whether you’re someone who drives safely all the time or someone who doesn’t drive much at all, we’re here to help get you the best premium on your insurance possible. Contact one of our agents for a quote on your auto insurance, and start saving today!