What is UBI in Insurance?

Phone operating UBI program for insurance inside car.

UBI programs have grown in popularity for insurance customers in recent years. It’s one of the many ways you can save money on car insurance, but is it worth it? What does UBI mean in insurance anyway? Here’s everything you need to know and how you can use it to save money on your car insurance.

What is UBI in Insurance?

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

UBI, or usage based insurance, monitors your driving to personalize your insurance rate.

UBI programs do this by monitoring your trips, either with a device that plugs into your car or with a mobile app. These relay your driving information back to your insurance company. With this information, the insurance company can offer you a rate or discount that’s wholly unique to you.

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. Where usage based insurance differs is how your policy is priced.

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 is truly personalized to you and your driving habits.

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. There may be a device you plug into your car’s diagnostic port, or a mobile app for your phone. Sometimes, your driving information can be gathered from your vehicle’s onboard systems.

If your UBI program is a mobile app, it will most likely use the GPS on 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 habits, which may be based on the following:

  • Speed
  • Braking
  • Acceleration
  • Time of day
  • Total miles driven
  • Mobile phone use

Typically, you’ll need to log a certain amount 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 amount of trips within a period of time.

Discounts will usually be applied at your next renewal. Consistently logging your trips will help maintain your discount throughout the life of your policy.

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 habits. 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.

If you’re a good driver, UBI can help you save money on car insurance.

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 with a usage based insurance program also helps you become a safer driver. You’ll become more aware of how you drive, and develop safer driving habits.

UBI Tips

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. Keep the following in mind as you drive- not only will you drive safer, you may save some money.

Smooth Driving

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


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.


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- 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 touch your phone.

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.


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

Is It 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 habits 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.

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