What is usage-based insurance?
Usage-based insurance (UBI) helps align your auto policy's cost with your driving habits. While auto insurers have traditionally used factors such as your age, location, and motor vehicle report in determining your risk for an accident, usage-based insurance helps calculate your rate for auto insurance by analyzing how often and how safely you drive. Optional UBI programs are offered by many auto insurers and can be mutually beneficial — you may earn a rate reduction and your insurer uses the data to more appropriately price your policy.
How does usage-based auto insurance work?
Your driving behavior is typically measured using a plug-in device or a mobile app for a period of months. After your UBI program concludes, your insurance company will take the data into account when calculating your premium. The guidelines and level of savings will vary by insurer. While your rate could be substantially discounted based on the results of your UBI program, it's possible that your policy's premium will increase.
There are two basic types of usage-based programs:
- Driving-based: Your driving habits are measured based on factors like how hard and how often you brake, how quickly you accelerate, and the time of day you drive.
- Mileage-based: Your insurer only measures how many miles you drive.
Both programs rely on telematics to gather information about your driving behavior. Telematics can transmit data from moving vehicles and share it with an information center. Whether your usage-based program calls for on-board diagnostics (a device plugged into your vehicle) or a mobile app downloaded to your smartphone, your insurer uses telematics to collect information about your driving tendencies, including hard-braking, rapid acceleration, speed, distracted driving, and how quickly you take turns in the road.
Benefits of usage-based insurance
Usage-based programs have become popular, as they leverage technology to help auto insurers more accurately measure your risk for an accident. Here are the advantages of UBI:
- Discounted premiums: Participation in a UBI program can mean both an immediate discount and long-term savings. Data collected by your insurer proving you're a safe driver equates to a lower car insurance rate.
- Safer driving: Drivers are apt to operate their vehicle more cautiously when they know they're being monitored, leading to less accidents and violations.
- Improved habits: If you struggle to brake gently or take turns too fast, usage-based programs may provide analysis to help you identify ways to become a better driver.
- Tracking helps with accidents: Investigating an accident could be easier if investigators know the speed and direction of the vehicle(s) involved.
Understand that not all drivers will get cheaper car insurance rates with usage-based programs. If you aggressively accelerate or frequently slam your brakes, your insurer could raise the cost of your policy. Keep in mind, the device or app lacks the ability to know when you're driving defensively — like braking suddenly and swerving to avoid hitting an animal or pedestrian.
When you're looking for auto insurance, compare car insurance quotes from multiple companies to make sure you pick the right amount of coverage for the right price.
Pro tips for a UBI program
Drive less: If you have a road trip or vacation with a lot of driving scheduled, hold off on trying a usage-based program. Choose a period of months when you know you'll be driving as little as possible.
Avoid driving after midnight: Accidents are all too common between 12 a.m. and 4 a.m. If your device or app observes frequent driving during this time frame, especially on the weekends, your policy's price could go up.
Check UBI feedback: If your program provides feedback on your driving habits, use the information to improve as a driver.
Don’t drive distracted: Avoid multi-tasking, eating, and using your cell phone while you’re behind the wheel.
Car insurance by the mile vs. usage-based insurance
While uncommon, some insurers may offer "pay-per-mile car insurance" in certain states. That means your policy's price strictly correlates only to how many miles you drive. Pay-per-mile policies can be expensive, even if your daily commute is small, because the miles add up quickly. If you're an infrequent driver hoping for a reduced rate, participating in a habit-based UBI program could be more advantageous than pay-per-mile car insurance.
Does Progressive offer usage-based car insurance?
Yes! As an industry leader in usage-based insurance, our Snapshot program customizes your car insurance rate based on your driving habits (how you drive, how much you drive, and when you drive). Drivers who save with Snapshot save an average of $231 a year.* We'll even kick in an automatic discount just for trying Snapshot.‡ While the majority of drivers will save money with Snapshot, your rate could increase as a result of high-risk driving.
How to start with usage-based insurance
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