You've probably heard of usage-based insurance, but perhaps you're not sure if it's a good idea for you. Once you weigh the risks and benefits, you can decide if it's right for you, and if you do, you'll want to check out some of the best usage-based insurance programs available.
Depending on your situation, pay-as-you-drive insurance might be an ideal usage-based insurance coverage. We'll compare by-the-mile and usage-based plans to explain the difference and which is the best fit for different situations.
We'll also share how insurance companies offer a usage-based insurance (UBI) program to monitor your driving habits through an app or an installed device and the savings they promote.
The Risks and Benefits of Allowing Telematic Monitoring
Insurance companies use the information they collect through telematics to set rates. They use your information specifically for you, but they also use it to mine information in their general calculations. In a way, when you allow insurance to track your driving, you're helping them develop more accurate risk algorithms to use for all customers.
Benefits of Usage-Based Programs
If you're a good driver, it doesn't seem fair to pay the same premiums as someone who's more reckless. Telematics allows an insurer to base your premiums more on your driving skills and less on other seemingly unrelated factors like your credit score.
Some insurance programs give you a discount just for signing up for their telematics program. Then, if you're a low-risk driver, they'll give you an additional discount. It makes sense to join in situations where there's only a benefit and no risk of increased premiums.
Risks of Usage-Based Programs
Some insurance companies advertise that you can use their tracking program with no risk of higher premiums. But others may increase your rates based on your driving habits.
So, unless you're sure your behavior behind the wheel is above average, you shouldn't risk increasing your premiums by allowing your insurer to track you. Not only could your premiums increase, but if you're flagged as a high-risk driver, your insurer may decide not to renew your coverage.
In addition to the risk to your coverage, there's a risk to your privacy. Many people are OK with what they deem harmless tracking, but a usage-based policy isn't for you if it makes you nervous.
By-the-Mile Insurance Versus Usage-Based-Insurance
By-the-mile insurance programs base rates on the number of miles driven each month. In a way, it's usage-based, but when comparing terms, they're two different ways of monitoring.
Usage-based car insurance monitors the way you drive by tracking the following data:
• Acceleration
• Braking
• Mileage
• Speed
• Time of travel
Usage-based insurance is a traditional car insurance policy where the policyholder opts into a tracking program. The point of using telematics is to get a discount.
Before you jump into a program, make sure you won't end up paying higher premiums for risky driving behaviors. For example, if you spend your downtime researching how to tune your carburetor for racing, you might not be ready to share your driving habits with your insurer.
By-the-mile programs, also called pay-as-you-go insurance, are different from traditional insurance. Instead of paying a set monthly premium, customers pay a low base rate and a per-mile fee.
For drivers that travel infrequently or only short distances, pay-as-you-go insurance can save them hundreds of dollars a year.
Best Usage-Based Car Insurance Programs
Some people aren't worried about tracking, and others are on the fence about it. However, the saying "money talks" rings true with telematic tracking for usage-based insurance. The savings made possible by opting into UBI win many people over.
Many companies offer up to a 30% discount, and a few advertise even higher potential savings.
Allstate DriveWise
With DriveWise, you could save up to 40% on your car insurance premiums. Allstate tends to be one of the more expensive car insurance companies, but they offer generous discounts. Before writing them off in a price comparison, make sure you check out their available discounts.
To get started, you'll need to download the app, which will track your driving behaviors. Then, you'll receive a premium credit every six months based on your driving habits. Those monitored habits include speed, braking, and time of day of your drive.
You can check on your driving trends to know how you're doing. Sometimes simply seeing a summary of your driving habits can help you make changes that make you safer.
Liberty Mutual RightTrack
RightTrack monitors your driving for 90 days and then locks you into a discount as long as you carry Liberty Mutual car insurance, even when you change vehicles. So you could save up to 30% for the rest of your life, and you'll receive a discount just for signing up.
The program monitors total miles driven, nighttime driving, braking, and acceleration.
Nationwide SmartRide
With SmartRide, you can save up to 40% on your premiums. You'll even get a 10% discount just for enrolling.
Nationwide's program monitors several driving behaviors, including braking. Hard braking above 7.7 mph per second impacts your driving profile negatively, as does driving at night, driving many miles, and idling during a trip. If you're wondering what idling has to do with safe driving, the usage-based data associates the time you're not moving during your trip with urban traffic.
Knowing what factors matter can help you decide whether you'd be a good candidate for the program.
SmartRide won't monitor you forever, though. Instead, you'll download an app that will monitor your driving for a set amount of time, and then you'll lock in your discount.
State Farm Drive Safe and Save
State Farm offers a discount of up to 30% off for low-risk driving and, like Nationwide, 10% off just for joining.
You'll need to download the Drive Safe and Save app and turn on Bluetooth on your phone to participate. If you have a connected Ford or Lincoln vehicle, you can join the program through the car's connection.
Drive Safe and Save monitors acceleration, braking, cornering, speeding, and distracted driving.
You'll receive feedback on these habits, and the program also monitors how much and when you drive.
What you believe about your privacy and how to protect it is personal, but if you're open to telematics, you can save a lot of money if you practice good driving habits. Just make sure you don't opt into a program that could raise your rates unless you are confident that your driving is in line with low-risk behaviors.
(Photo : Melanie Musson)
Melanie Musson writes and researches for the insurance comparison site, ExpertInsuranceReviews.com. She's passionate about sharing car insurance insights with others so they can find the policy that serves them best with no surprises.
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