Is Usage-Based Car Insurance Right for You?

Last Updated on January 26, 2026

Usage-based car insurance (UBI) has become increasingly popular among drivers who want a more personalized—and potentially cheaper—insurance experience. Instead of relying only on traditional pricing factors like age, driving record, vehicle, location, and mileage estimates, UBI uses real driving data to help determine how much you pay. But is it right for you?

Below, we break down how usage-based insurance (also called telematics insurance) works, its advantages and disadvantages, and which types of drivers benefit most from it.

Key Takeaways

• Usage-based insurance adjusts your rate based on actual driving behavior, not assumptions.
• Safe, low-mileage drivers often save the most.
• Privacy concerns and inconsistent scoring are major drawbacks.
• UBI can be a smart option—but it isn’t right for every driver.

How Does Usage-Based Insurance Work?

Traditional auto insurance assigns your rate based on how drivers similar to you behave. For example, if you’re a 25-year-old driver who drives 10,000 miles a year, your insurer uses claim statistics from similar drivers to price your policy.

Usage-based insurance takes a different approach. Instead of assuming how you drive, it measures your actual driving habits in real time. UBI programs typically track:

• How many miles you drive
• Time of day (daytime vs. late-night driving)
• Driving behavior (speeding, hard braking, rapid acceleration)
• Road type (highway vs. high-risk local roads)

UBI is also known as “pay-as-you-drive” (PAYD) or “pay-how-you-drive” (PHYD). Most insurers track your habits using:

• A plug-in device that connects to your car’s OBD-II port
• A mobile app that collects telematics data
• Built-in vehicle data (newer cars transmit driving metrics automatically)

Some insurers only track drivers for a short introductory period. Others require continuous monitoring for as long as you participate in the program.

Important: Not all UBI programs work the same way—some are discount-only (poor results usually mean a smaller discount), while others can influence your price more broadly at renewal. We explain this in Can Usage-Based Insurance Increase Your Rate?.

How UBI Scoring Typically Works (and What Hurts You)

Every insurer scores differently, but most programs reward smooth, predictable driving and penalize higher-risk patterns.

Types of Usage-Based Insurance (UBI): Pay-Per-Mile vs Telematics Discounts

Usage-based insurance (UBI) is an umbrella term. Some programs mainly price on miles driven, while others focus on how you drive (telematics). Here’s the quickest way to tell which is which.

Is UBI Right for You? A Quick Decision Guide

• Choose pay-per-mile if you drive infrequently and want pricing tied mostly to miles.
• Choose a telematics discount program if you drive regularly but have smooth, safe habits.
• Stick with traditional insurance if you don’t want tracking or your driving patterns are unpredictable (night shifts, heavy traffic, frequent long trips).

Benefits of Usage-Based Insurance

UBI can be a great option for drivers who have safe habits, drive less frequently, or want to be rewarded for responsible behavior. Here’s why:

• Financial rewards for good driving: Safe drivers can earn sizable discounts on premiums.
• More accurate pricing: You’re charged based on how you drive, not based on others in your age or demographic group.
• Encourages safer driving: Many participants report braking more gently, avoiding speeding, and taking fewer risks.
• Good for low-mileage drivers: Those who drive infrequently may save the most money.
• May help recover stolen vehicles: GPS-enabled devices can locate a stolen car faster.

Usage-based insurance particularly benefits drivers who:

• Have very low annual mileage
• Drive during the day rather than late at night
• Have a clean driving record
• Use highways more than local congested roads

Disadvantages of Usage-Based Insurance

Despite the potential savings, UBI isn’t perfect. Consider these drawbacks before signing up:

• Privacy concerns: Some drivers are uncomfortable with insurers tracking their location or driving behavior.
• Bad days can hurt you: A few harsh-braking or late-night trips may hurt your score and reduce your discount.
• Not standardized: Each insurer uses different telematics scoring, making it hard to compare pricing.
• Discounts aren’t guaranteed: If your driving habits don’t meet expectations, you may see little to no savings.
• Data errors happen: GPS or telematics glitches may record your driving inaccurately.
• May discourage price shopping: Because UBI is customized, drivers may feel “locked in,” reducing competition among insurers.

Some critics argue that UBI benefits insurers more than consumers, since telematics gives them more data—and more justification to adjust pricing.

Privacy & Data: What UBI Programs May Collect

Data collection varies by program. Some focus mostly on driving events, while others also collect GPS location or phone-distraction signals. Before enrolling, check what’s collected and how it’s used.

• What to check: Is GPS collected? Is phone use tracked? Can you opt out? How long is data stored?

Can Usage-Based Insurance Increase Your Rate?

Sometimes, yes—depending on the insurer, the specific program, and your state. Many UBI programs market themselves as “discount programs,” where poor driving usually means a smaller discount (or no discount). But some programs can influence pricing more broadly at renewal.

• Discount-only programs: You typically keep your regular premium and earn a discount if your score is good.
• Score-influenced pricing: Your telematics results may have a bigger impact at renewal (this varies by program and state).
• Bottom line: Before enrolling, confirm whether the program is “discount-only” and whether it can affect your renewal rate.

Best Usage-Based Insurance Programs (Compared)

Here’s a quick comparison of popular UBI programs. Availability and program rules vary by state, insurer, and driver profile.

More Usage-Based (Telematics) Programs (Not Listed Above)

These are additional telematics/UBI programs. (The most common programs are already included in the comparison table above.)

• American Family – KnowYourDrive
• Esurance – DriveSense
• Farmers – Signal
• Hugo Insurance
• Liberty Mutual – RightTrack
• MAPFRE – DriveAdvisor
• MetLife – My Journey
• Mercury – RealDrive
• National General – SmartDrive
• Noblr
• Root Insurance
• Safeco – Rewind
• State Farm – Drive Safe & Save
• USAA – SafePilot

How to Try UBI (and How to Opt Out)

• Get a quote for both UBI and a standard policy with the same coverages.
• Install the app or device and follow setup instructions (permissions matter for app-based programs).
• Complete the monitoring period (some programs evaluate you for a set period, others are ongoing).
• Review your results and confirm how the discount is applied.
• Opt out if needed—most programs allow this, but your discount may be removed.

Usage-Based Insurance FAQs

Conclusion: Is Usage-Based Insurance Right for You?

Usage-based insurance can be an excellent choice for drivers who are genuinely low-risk—those who drive less, drive gently, or drive at safer times of day. These drivers may save a substantial amount of money.

However, UBI isn’t ideal for everyone. Privacy concerns, inconsistent tracking methods, and the unpredictability of telematics scoring can make usage-based programs less appealing. Before enrolling, weigh the pros and cons and consider whether you’re comfortable with your driving habits being monitored.