Usage Based Car Insurance

Posted on May 6, 2022 at 8:00 AM by Town & Country Insurance

The basic principle behind UBI is outlined in its name, you pay only for what you use. By proving that you're a good driver or don't put a lot of miles on your car, insurers will lower your premiums – sometimes up to 50%. Its savings come from letting insurers track how, when, and sometimes, where you drive.


1.What can UBI do for me?

  • Get personalized rates
  • Receive instant feedback on your driving habits, which helps you drive better when you are behind the wheel
  • Locate your vehicle if it is stolen

2.How does UBI Work?

Instead of assuming that everyone in a certain demographic is at the same risk of getting in an accident, UBI lets insurers calculate rates based on the way individual people drive. For example an 18-year-old driver, enrolling in UBI would let the car insurance company see that he doesn't treat driving like an audition for The Fast and the Furious. Because of that knowledge, the insurer would cut the teenager a lower rate for his good driving habits.

3.How is the data transmitted to my insurer?

Different plans use different methods for collecting this information. By understanding the various ways insurers monitor your driving habits, you can decide which methods you're comfortable with and which you'd rather avoid. No matter what data-tracking choice you make, it will be a form of what's called telematics.

What are Telematics?

In a nutshell, telematics are the different methods for transmitting data from your car to your insurer. That makes them the engine powering all UBI programs, as this data is necessary for a car insurance company to calculate your personalized rate. Both Pay How You Drive (PHYD) and Pay As You Drive (PAYD) plans use these devices for monitoring how safe and how often people drive. Most drivers will be familiar with at least one of the three forms of telematics insurers use to collect information.

  • OnStar and SYNC: Anyone who's called for a tow using OnStar or sent a text using SYNC is already familiar with telematics. Some insurance programs use these built-into-your-car communication platforms to monitor mileage and other driving habits – after all, that's what the device is meant to do.
  • Plug-In Devices: For PHYD customers without OnStar or Sync, many insurers usually offer a small telematics device that can be used in cars built after 1996. For these newer cars, the device plugs into a vehicle's on-board diagnostic port (though it needs to be an OBD-II port, as the ports for older cars are not compatible with these devices). That's the same port mechanics use to get the error code for whatever causes your check engine light to start glowing. UBI plans don't track whether your radiator is low on coolant, though, as connecting the telematics device into the OBD-II port only allows it to gather data from your car about when, how, and sometimes, where you drive. This information is then sent straight to your insurer. This lets your car insurance company either track just mileage driven in the case of PAYD plans, or g-forces and sudden changes in speed.
  • Smartphone App: Unfortunately some cars built before 1996 have an incompatible onboard diagnostic port for telematics devices, however some insurers have begun offering a “smartphone app to consumers, who use the technology in their cars in exchange for a possible discount." That means if you're the proud owner of a classic '55 T-Bird without one of these ports, you can still add your roadster to a UBI plan offering smartphone telematics. 

4.What type of data and how much can my insurer collect?

Every plan places limits on what data it collects, and how it is used. The amount of data collected on a driver will vary based on which program they select. For instance, some companies have a pay-per-mile program that monitors only a car's mileage and GPS location, while SmartRide from Nationwide detects the number of miles driven, as well as accident-causing factors like hard braking and acceleration, idle time, and nighttime driving.

Whether UBI is the right car insurance solution for you, it's always worth taking a minute to explore ways to lower your insurance premiums. Contact a Town & Country Insurance Agent today for additional info on UBI and if it is right for you!

Disclaimer: The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy. Some of the coverage mentioned in this material may not be applicable in all states or may have to be modified to conform to applicable state law. Some coverages may have been eliminated or modified since the publishing of this material. Please check with your local Independent Town & Country Insurance Agent for details.


Categories: Vehicle Insurance