Save 40% With Usage-Based Insurance
Clearsurance.com recently published a report on usage-based insurance (UBI) and what it means for car insurance coverage. According to this report, a good driver could save up to 40% on car insurance, with some policies starting at just $26 a month.
Usage-based insurance requires drivers to allow insurance providers to monitor driving habits. The insurance company then offers a discount or lower premium based on specific factors related to driving.
Companies With the Lowest-Cost Premiums
Average rates and individual rates will likely vary significantly. Melanie Musson, a nationally recognized insurance expert with Clearsurance.com, explains, “Getting individualized quotes will give drivers a much more accurate quote than generalized averages.”
Below are averages for UBI insurance from top companies:
- Safeco – $26
- Mercury – $29
- Travelers – $37
- Progressive – $38
- Nationwide – $43
- American Family – $44
- Geico – $45
- State Farm – $50
- Liberty Mutual – $55
- Allstate – $61
Most of these companies offer discounts of up to 30% and 40% for drivers who have the safest driving habits as determined by the insurance company. Drivers may also save by finding auto insurance discounts and comparing quotes.
Types of Usage-Based Insurance
There are three main types of usage-based insurance:
- Pay-As-You-Drive
- Pay-How-You-Drive
- Manage-How-You-Drive
Pay-as-you-drive coverage is a mile-based type of insurance. There is a base rate that drivers pay for the policy, and then they pay a per-mile rate. A few insurance companies, like Metromile, offer this type of policy.
Pay-how-you-drive is the most popular usage-based insurance policy. Many insurance companies offer this type of policy. Some popular programs include Progressive Snapshot, Allstate Drivewise, and State Farm Drive Safe and Save.
A policyholder agrees to allow their insurer to monitor their driving through an app or a device installed in their vehicle. The insurance provider then bases rates on driving metrics related to speed, braking, cornering, and time of day traveled.
Mange-how-you-drive policies usually work in conjunction with pay-how-you-drive policies. They provide feedback on the driving data collected, with the goal of helping the driver develop safer driving habits.
Driving Habits UBI Monitors
UBI programs monitor several factors related to driving. Not all companies collect the same data. They also determine discounts using different calculations.
Most UBI policies monitor braking. Hard braking can indicate aggressive driving and is assessed as a risk factor. Drivers who frequently practice hard braking will likely not receive a significant discount.
Acceleration and speed are two more factors that most UBI programs track. Fast acceleration indicates aggressive driving, and high speed indicates an increased risk of losing control.
Drivers who travel during rush hour or late at night may not experience the discount that someone who drives during daylight, off-peak hours would receive.
Usage-Based Insurance Pros and Cons
Usage-based insurance has the potential to help drivers save hundreds of dollars, but it also has some potential downsides.
UBI Pros
Usage-based insurance can help drivers save money.
Programs that offer feedback can help drivers improve their driving habits and become safer drivers.
Some companies offer a discount just for opting into the program. The driver may get an additional discount for practicing good driving habits, but even if not, they’re eligible for a discount for opting into the program.
Some programs that use GPS tracking can help car owners recover their car if it has been stolen.
UBI Cons
To join a UBI program, drivers must allow insurers to monitor their driving. Some view this as an invasion of privacy, and they may not wish to provide personal data to their insurance provider.
Some companies will increase driver premiums if their driving habits are deemed unsafe.
Read Clearsurance.com’s entire report here: Usage-Based Insurance (What It Means for Your Coverage).