Key Takeaways
- Usage-based insurance is a program where insurers monitor driving behavior in return for a potential premium discount.
- Safe drivers can potentially lower their premiums, though risky drivers might see their rates increase.
- Major insurers like Progressive, State Farm, and Nationwide typically offer usage-based programs.
What Is Usage-Based Insurance?
Rather than a distinct insurance type, usage-based insurance is a discount opportunity that utilizes telematics—data collection technology—to assess driving habits.
Insurers generally provide a premium discount upon enrollment. Safe drivers may qualify for additional discounts upon renewal or after a trial period.
However, risky driving habits can lead to increased premiums. For instance, Progressive reports that two out of ten participants in its program experience a rate increase.
Insurers may gather driving data via a mobile application or a plug-in device, evaluating behavior over a 90-day period or on a continuous basis.
Is Usage-Based Insurance Different From Regular Auto Insurance?
No, the coverage remains identical to a standard auto policy. While usage-based insurance factors in actual driving behaviors to calculate rates, it provides the same coverage as a regular policy. Your driving record, vehicle, and personal factors still influence your insurance costs.
Pros and Cons of Usage-Based Insurance
Pros
- You may qualify for significant discounts, potentially exceeding 40% at renewal in certain cases.
- You receive feedback to help improve your driving safety.
- You can opt out of the program if it does not meet your needs.
- Safe drivers may qualify for additional perks, such as giveaways, depending on the program.
Cons
- Your rates may increase if you do not qualify for a discount.
- You must share extensive real-time driving data with your insurer.
- Usage-based insurance is not available in all regions; for example, California does not permit these programs.
Driving Habits Tracked by Usage-Based Insurance
Usage-based insurance monitors how well, when, and how much you drive. However, insurers weigh each driving habit differently.
- The time of day you drive
- The force of your braking
- Your acceleration and speed
- Your handling and cornering
- Cell phone usage while driving
- Your total mileage
- Any accidents you are involved in
- The amount of time your vehicle is idle during a trip
Usage-Based Insurance vs. Per-Mile Insurance
Some insurers offer per-mile insurance, where your rate depends entirely on the number of miles you drive, resulting in a varying monthly premium based on your mileage.
While mileage is a factor in most usage-based programs, it is the primary determinant of your rate in a per-mile program. While a handful of insurers, including Allstate, Lemonade, Nationwide, and USAA, offer a standalone per-mile option, most major carriers provide usage-based insurance.
Is Usage-Based Insurance Right for You?
Usage-based insurance offers benefits but is not suitable for every driver. It may be worthwhile if you are a safe driver comfortable sharing your data with your insurer to potentially secure lower premiums.
These types of drivers might also benefit from usage-based insurance:
- New drivers and parents: This program can help parents reduce family premiums, and it may reinforce safe driving habits for teens and young drivers.
- Drivers with poor credit: Because poor credit can increase rates by an average of 49%, safe drivers with poor credit may benefit from usage-based insurance to lower their premiums.
- Infrequent drivers: If you rarely use your vehicle, mileage-based factors in these programs could work in your favor, as infrequent drivers are statistically less likely to be involved in an accident.
Which Companies Offer Usage-Based Insurance?
Most major U.S. car insurance companies offer usage-based insurance.
Programs are similar across insurers but vary in advertised discounts and tracked behaviors. Availability also differs by state, even if the insurer sells standard auto insurance elsewhere.
| Insurance Company | Can Your Rate Go Up? | Discount | Availability |
|---|---|---|---|
| Progressive Snapshot | Yes | Average discount of $328 per year | Not available in CA, HI, and NY |
| State Farm Drive Safe & Save | Yes | 10% at sign-up, up to 30% or more in some states | Not available in CA, MA, or RI. Also not always available in NC. |
| GEICO DriveEasy | Yes | No specific advertised discount | Not available in CA, HI, or VT |
| Farmers Signal | Yes | Sign-up and renewal discount for some drivers, plus the chance to be entered to win up to $100 in merchant rewards each month | Not available in CA, FL, HI, or NY |
| USAA SafePilot | No | Sign-up discount of 15%, renewal bonus of up to 30% | Not available in CA, some restrictions in MA |
| Nationwide SmartRide | No | Sign-up bonus of 10%, with a total discount of up to 40% | SmartRide works differently in CA and NC than other states |
| Liberty Mutual RightTrack | Yes | Sign-up bonus of 10-15%, with savings up to 30% | Not available in AK, CA, HI, MD, NY, NC |
| Allstate Drivewise | Yes | Potential discounts vary by state | Not available in AK and CA |
| Travelers IntelliDrive and IntelliDrive365 | Yes (IntelliDrive won’t raise rates for risky driving behaviors in DC, MT, NC, and VA. Rate increases are possible anywhere with IntelliDrive365) | Total discount worth up to 30% for both versions | IntelliDrive: AL, CT, DC, IA, MD, ME, ND, NV, SD, VA, WA, WI. IntelliDrive365: AR, AZ, CO, DE, FL, GA, ID, IL, IN, KS, KY, MA, MN, MO, MS, MT, NC, NE, NH, NJ, NM, OH, OK, OR, PA, SC, TN, TX, UT, VT, WY |