December 2, 2020

Advantages of Usage-Based Insurance (UBI)

Usage-based insurance (UBI) is an emerging feature in car insurance that correlates insurance price to a user’s real-world driving information. As the name suggests, UBI insurance requires an in-vehicle device that monitors usage, particularly the safety, mileage, and driving conditions, in addition to other factors, to provide discounts to safe drivers. There are many advantages to this type of insurance. Let’s take a look at the reasons UBI could be the right choice for you. 

Savings for Safety

For safe drivers with low annual mileage, UBI can be the best option available. UBI tracking devices monitor and penalize certain things like driving at high speeds and hard braking, so safer driving is encouraged and rewarded. After the initial monitoring period, the company will determine your rate based on your driving data that was collected and analyzed. On average, UBI saves customers 10-15% annually on their car insurance. 

The safety monitoring features can also make UBI an excellent option for your family, teen drivers, or even employees. Many UBI devices are also traceable and can alert when the vehicle leaves a particular predetermined area. These devices are GPS-enabled and can quickly provide vehicle location in the event of theft or accident. Accident investigations can be assisted with UBI devices because they track speed and direction immediately before the accident occurred. 

One of the main goals of UBI is to encourage safer driving. The UBI monitoring device provides real-time data on your driving history and can show you exactly where you were penalized. This data promotes resolution and improvement in your driving, which can, in turn, improve your insurance rate. 

An Even Playing Field

Because UBI rewards safe driving and lower mileage, the traditional process of determining car insurance rates based on certain criteria becomes less of a necessity. Using real-time data from a user’s driving style takes precedence over the need to analyze other possibly-discriminatory qualifying factors like credit score, occupation, and education. Driving data from usage-based insurance devices that is used to determine insurance premiums eliminates this risk and allows a more fair approach to establishing rates. 

The Lower The Better

Usage-based Insurance can be one of the best options for safe drivers who don’t accumulate a ton of mileage annually. Because UBI also rewards drivers who drive less, an individual who has a particularly long commute or logs a lot of miles may not see any change or savings from a usage-based plan. Typically, drivers who drive less than 11.5k miles per year, or the average annual mileage a driver logs in the US, are the best candidates for usage-based insurance. Anyone driving more than that amount may be better off with a traditional plan. 

Data and Privacy

Though UBI can reward many safe drivers and lower insurance premiums, there are a few factors worth noting. A UBI device or application has consistent location tracking and data collection from your vehicle. It is essential to read the fine print when considering a usage-based insurance plan and define exactly how your data will be used to protect your personal privacy. 

Certain states throughout the US may not participate in certain aspects or be optimal locations for a usage-based plan. Be sure to do your research regarding how your driving style and geographical location can influence your rates. 

Available UBI Options

There are many insurance companies providing UBI options to drivers. Here are some of the most credible companies offering a usage-based option. 

Nationwide Smart-Ride

Allstate DriveWise

Progressive Snapshot

State Farm Drive Safe & Save

Travelers Intellidrive

The Future of Usage-Based Insurance

As usage-based insurance gains popularity, it is providing incentives to safe drivers and learning opportunities to others. Saving money and safer roads seem like the ultimate win-win if the conditions and plan are right for you. 

To learn more about your opportunities for usage-based or other car insurance options, contact Lewis Insurance and Financial today!

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