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.
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.
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.
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Disclaimer: The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy.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.