Usage-based insurance discounts: How to save based on how you drive

Q: Does usage-based insurance save you money?

In general, yes . If you have safe driving habits, you will save money. The only time it backfires is if you speed or have bad driving habits while using the mobile app. Your insurance company will see how you drive.

Usage-based insurance programs: What they are, how they work

Usage-based insurance (UBI) programs monitor your driving habits to determine if you qualify for a discount. Using an app or plug-in device, the company monitors things like:

Speed and acceleration
Braking habits
Time of day
Amount of time spent on the road
Use of your phone while driving

After a set period of time, a discount is calculated based on the information recorded by the program, which is usually applied when your policy renews.

EXPERT TIP: Some companies will actually increase your rates if you display unsafe driving habits like speeding or hard braking. Make sure you know the risks before you sign up.

“Usage-based insurance monitors drivers’ actual driving behaviors and transmits those to the insurance company,” says Brenda Wells, director of the risk management & insurance program at East Carolina University. “[While} UBI still uses the factors for regular auto insurance, it also adds in the insured’s actual driving performance.”

Is a pay-as-you-drive discount the same as a usage-based discount?

Pay-as-you-drive is a term commonly used to describe usage-based insurance programs that use telematics to calculate a discount.

Pay-per-mile programs are also available, which track your actual mileage and charge you a set rate for each mile you drive. These programs track only mileage and not driving habits. Rates are based on those miles along with a base rate; it's not a discount.

Apps and plug-in devices: How data about your driving is gathered

Telematics programs use either a device that plugs into your car or a mobile app to track driving habits. When these programs were first introduced, plug-in devices were the main source of data. The advances in mobile technology have made apps more common.

“The monitoring device, usually a cell phone with a special app installed, measures things like miles driven, time of day driven, speed, hard braking, taking curves too fast, etc. This data gives the insurance company the ability to add actual driving performance to the list of risk indicators used to calculate the premiums,” Wells says,

Bear in mind that any discounts depend on being a safe driver, which means not speeding and obeying all traffic laws. “UBI can lower your premiums if you’re a safe driver. If you’re not, or if you drive a lot of miles that the insurer otherwise would not know about, UBI can actually increase your premiums,” she says.

Not all companies will charge higher premiums based on telematics data.

A question of privacy: Is your insurance company protecting your data?

One of the major concerns people have with usage-based insurance is privacy, and with good reason. There have been several lawsuits regarding the use of driver data by insurance companies in recent years. Some states have enacted laws regarding usage-based insurance, and California has outright banned it.

Before you sign up for any usage-based program, read the fine print for clarity on how your data will be used. As a consumer, you have rights regarding data privacy.

Pay-as-you-drive car insurance companies: Which companies have usage-based programs?

Allstate, American Family, State Farm and Travelers are among the major car insurance companies that offer usage-based programs. Discounts range from 10% to 40%, and most companies offer a small discount just for signing up.

The following companies offer usage-based programs, although they may not be available in every state. Each company weighs different factors of your driving, such as speed, braking and what time of day you drive.

Company	Program name	Device or app	Possible discount*	Possible rate increase?
Allstate	DriveWise	Mobile app	10-40%	Yes
American Family	Drive My Way	Mobile app	5-20%	Yes
Esurance	DriveSense	Mobile app	30%	No
National General	Dynamic Drive	Mobile app	10%	Yes
The Hartford	TrueLane	Mobile app	12-25%	No
Progressive	Snapshot	Mobile app or plug-in device	varies	Yes
Safeco	Rewind	Plug-in device	varies	No
State Farm	DriveSafe & In-Drive	Mobile app & Bluetooth beacon	10-30%	Yes
Travelers	IntelliDrive	Mobile app	30%	Yes
Nationwide	SmartRide	Mobile app	40%	No

*Note that top-end discounts are often difficult to attain, requiring excellent driving habits. Most drivers see smaller discounts.

Allstate

Allstate offers usage-based insurance through its DriveWise mobile app. Upon activating the app, you receive a discount, and every six months, you are rewarded with credits for safe driving. Discounts range from 10% to 40%.