What is Usage-Based Insurance (UBI) / Telematics in insurance?

UBI stands for usage-based insurance. Simply put, it’s an insurance product that rates drivers based on their individual driving behavior and car usage. Sometimes, UBI can be known as telematics insurance, behavior-based insurance, or black box insurance.

UBI programs monitor users that either drive with a device that plugs into their car or with a mobile app. This relays the user’s driving information back to their insurance company. With this information, the insurance company can offer a rate or discount that’s wholly unique to the driver.

Usage-based insurance typically covers the same things that regular car insurance policies cover. You purchase the coverage you want and decide on limits and deductibles as usual.

Does usage-based insurance save you money?

How your policy is priced is where usage-based insurance differs from traditional car insurance.

Usually, car insurance rates are determined using historical data related to people who may have similar characteristics as you. Usage-based insurance instead helps the insurance company determine your rate based on your individual data.

This means that your insurance policy premium is truly personalized to you and your driving behavior, possibly helping you save money on your auto policy.

How does UBI work?

When you sign up for a UBI program, you’ll begin by setting up a way to monitor your driving trips. Most insurance companies provide a discount for participating in a UBI program.

If your UBI program offers a mobile app, it will most likely use various sensors in your smartphone. Be sure to let this app run in the background or turn it on before you begin driving. Devices that connect to your car’s diagnostic port will start automatically when you drive.

While active, a usage-based insurance program will assess driving. You’ll be scored based on your driving behavior, which may be based on the following:

Typically, you’ll need to log a certain number of trips during an assessment period to provide enough data for an accurate rate. Most usage-based insurance programs require you to make a minimum number of trips within a certain period of time.

Driving based discounts will usually be applied at renewal. Consistently logging your trips will help maintain your discount throughout the life of your policy.

What are the benefits of UBI?

Usage-based insurance programs offer a chance to save more on car insurance for the same coverage. With usage-based insurance, your rate is calculated based on your own driving behavior. This means that you don’t pay the same premium as anyone else who may have similar characteristics as you. The safer you drive, the more you save.

Since these savings are personalized to you, it’s a great way to save money on car insurance without lowering your coverage limits or raising deductibles. You’re saving money while maintaining coverage.

Driving tips for usage-based insurance

The best way to make the most of a usage-based insurance program is to drive safely. Even if you already consider yourself a safe driver, you can maximize your savings if you know how your driving is scored.

While each UBI program is different, the categories they consider will be similar.

Smooth driving

This typically measures how well you anticipate traffic flow. It could be based on the amount of acceleration and braking you exhibit while driving.

Frequent extreme or harsh braking could lead to a lower smooth driving score. Leave plenty of following distance between you and other cars.

Avoid speeding

Driving at safe speeds will improve this score, while speeding could lower it. Always follow the speed limit and keep a steady pace while driving.

Driver fatigue

The monotony of driving long distances can lead to driver fatigue and loss of attentiveness. Be sure to take breaks during long trips.

Time of day

Avoid taking late-night trips. Driving at night is always a safety risk, as the lack of visibility reduces your ability to respond to hazards.

Mobile phone use

It should go without saying that you shouldn’t be on your phone while you’re driving. Most UBI programs can detect how often you interact with your phone during a trip.

Playing music or using navigation doesn’t usually affect this score, as long as you don’t move your phone. Using features such as Apple CarPlay or Android Auto is a good idea.

Annual mileage

Mileage is not rated per trip but is based on the total distance traveled during an assessment period. Lower mileage drivers may qualify for better discounts.

Feedback

Many usage-based insurance programs provide feedback on your driving. Check out your driving scores often to see what you’re doing right and how you can improve your next trip.

Is usage-based insurance worth it?

Usage-based insurance is one of the best ways to save money on car insurance. UBI programs are designed to reward safe drivers, so the easiest way to save is to drive safely.

Most drivers will save money with UBI; however, some programs will give a surcharge for poor driving behavior or for high annual mileage.

Drivers who benefit most from UBI programs are those who consistently score highly on the driving assessments. To maximize your savings, you should aim to drive smoothly, keep a steady pace, and avoid late night trips. Low mileage drivers are more likely to qualify for better discounts.