If saving money on car insurance is something you would like to do, a usage-based insurance policy may be an option.
This type of policy sold by some car insurance agencies can be great for certain drivers; however, it may not be suitable for all drivers.
Will a usage-based policy from an auto insurance agency work for you?
Read below what usage-based auto insurance is, how it works, and who gets the largest advantage from this type of policy.
What Is Usage-Based Car Insurance?
Usage-based car insurance or UBI is a newer type of auto policy that insures based on driver habits, and what you do and don't do while behind the wheel.
Geared toward good drivers as well as those who spend limited time behind the wheel, UBI is an insurance option offered by auto insurance agencies that some drivers are finding to be very cost-effective for them.
How Does Usage-Based Auto Insurance Work?
User-based insurance policies sold by car insurance agencies work by monitoring certain factors about your driving habits.
There are two types of user-based insurance policies available today:
- Mileage-based - Mileage-based policies charge based on how many miles are driven.
- Behavior-based - Behavior-based policies charge according to how safe the driver is depending on how few unsafe behaviors are done while in the vehicle and other driving factors.
Some of these behaviors include the time of day the car is driven, vehicle speed, hard braking, aggressive acceleration, hard cornering, phone use while in the car, and other relevant habits.
How Is Usage-Based Car Insurance Moderated?
Usage-based car insurance is rated by collecting driving data using some kind of telematics system which is done in a number of ways.
Some auto insurance agencies collect their necessary data via an on-board data system such as OnStar or some other manufacturer-specific computer system, while others will install their own data tracking device into the onboard computer.
Some insurers will collect their data via a phone app that communicates with the vehicle’s computer or with a windshield tag that does the same.
Regardless of how it is done, all user-based insurance policies require some form of vehicle tracking that monitors mileage and driving behaviors, then reporting that data to the agency so the policy rate can be determined.
Is Usage-Based Insurance Right For You?
It really depends on what type of a driver you are.
If your hours behind the wheel are minimal and you only drive a few miles a week for errands and not much else, a mileage-based user-based insurance could save a great deal on auto insurance premiums.
This also applies if you have safe driving habits and avoid risky driving behavior that could increase the chance of an accident.
Yet one detail to understand before purchasing this type of insurance from a car insurance agency is that some insurers may ask you to participate in a preview period to determine whether user-based insurance is a good fit.
While this may sound like a good idea, it could lead to higher auto insurance rates rather than lower if the agency finds your driving habits to be unsafe or risky in some way.
Talk To Your Auto Insurance Agency About Usage-Based Insurance
The basic idea of usage-based car insurance is a good one for those who drive very few miles, and those with safe driving habits.
These policies, sold by auto insurance agencies now equipped to do the vehicle monitoring, may not be suitable for all drivers, however, and could even end up increasing premiums if drivers are thought to display risky behavior while behind the wheel.
When considering a user-based insurance policy, talk about it with a car insurance agency and make sure you understand all the fine print like what data is collected, how it is collected and used to calculate premium rates, and what happens if you do not qualify.
With that critical information, it should be easy to decide whether or not a user-based insurance policy will be advantageous for you!
