Usage-Based Insurance Rewards Good Drivers – [Forbes review]

If you’re a good driver, meaning you never get into car accidents or rack up traffic violations, you might feel like you’re paying too much for car insurance. Sure, your insurer might offer a car insurance discount for being a safe driver, but that still doesn’t seem like enough. Because good driving is more than not getting into accidents or tickets, it’s all the safe driving habits you practice on a daily basis that makes for safer roadways, right?

If you’re looking for a type of car insurance that better reflects your daily safe driving skills, then usage-based insurance (UBI) might be a good fit for you. UBI is an option offered by some auto insurance companies that could result in reduced car insurance rates based on your driving skills like speeding, acceleration and harsh braking, along with other metrics like mileage and the time of day you drive. Generally, the better you drive, the better your rates.

Usage-based auto insurance has some benefits that might be a better fit for you than a traditional car insurance policy, but it’s not for everyone. Here’s what you need to know.

Car Insurance Companies – [Forbes review]

4.5

Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.

Learn More

Car Insurance

Car Insurance Companies – [Forbes review]

4.5

Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.

Learn how you can get an insurance quote.

Drivers are required to have auto insurance in almost every state.

Customer happiness

Good

As per recent study

Price competitiveness

Very Good

Percent of customers satisfied with claims

78%

View Details

Why We Picked It

A car insurance quote is an estimate of how much you’ll pay for a policy. An insurance quote is calculated based on the information you provide, including your age, the car you drive, your driving history and where you live, among other factors.

Insurers each use their own unique formula to calculate a car insurance quote, so even if you provide the same information to Geico, Progressive or any other company, no two quotes will be the same. The more auto insurance quotes you get, the better chance you’ll have of finding the cheapest car insurance company for you.

Pros

• Basic information such as your name, address, occupation and birthdate.
• Your current auto insurance company, if you have one.
• Driver’s license information for you and anyone else on the policy

Cons

• Vehicle information, including whether you own or lease your car, vehicle identification number and any safety features.
• Driving history for the past five years for all drivers on the policy, including tickets, accidents and other violations. Bear in mind — any company you choose will find your driving history before issuing a policy, so it’s best to be upfront to get an accurate car insurance quote.

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 these ways:

• Through systems built into your car, such as BMW ConnectedDrive or OnStar
• Through a device plugged into your car’s on-board diagnostics (OBD-II) port, such as Nationwide SmartRide
• Through a smartphone app, such as Allstate Drivewise or Farmers Signal
• Through a device called a “tag” that is installed on your windshield or rear window and pairs with your smartphone via Bluetooth, such as Liberty Mutual Insurance RightTrack

Some insurance companies will offer you a choice of how you want the data collected, depending on where you live. For example, Liberty Mutual Insurance RightTrack offers you the choice among a tag, plug-in or mobile phone, while State Farm Drive Safe & Safe lets you choose between a smartphone app or your car’s OnStar system.

How your driving habits affect your car insurance premium will depend on your insurer, but in a typical UBI plan, your driving habits are 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.

For example, Travelers IntelliDrive is a 90-day program. After successfully completing the program, you could earn up to a 20% discount when you renew your policy.

Is Usage-Based Insurance Worth It?

Usage-based insurance might be worth it if you are a safe driver. And some insurance companies will give you an automatic discount simply for participating in the program. For example, Nationwide SmartRide gives you a 10% discount when you sign up.

But here’s where you really need to pay attention to the fine print. Some car insurance companies might raise your car insurance premiums if you don’t score well during the review phase of your UBI program.

For example, with Travelers IntelliDrive, risky driving habits like speeding and phone use could result in a higher premium than a traditional policy (although some states don’t allow this). If you’re the type of driver with a lead foot, it’s a good idea to get your bad driving habits under control before participating in a UBI program.