What Is Usage-Based Insurance (UBI) and Why Do You Need It?

Sep 19, 2024 2 min read

Usage-based insurance (UBI) is a way to rate auto insurance that’s based on your driving. The two primary types of UBI programs are discount and pay-per-mile.  If you’re a safe driver, UBI could save you money on your premiums. 

Here’s how UBI can make a difference in your auto insurance costs, and why you might want to see if it’s a good choice for you and your family.

How Does UBI Work?

Typically, your insurance company bases your car insurance rates on other drivers who are similar to you. Usage-based insurance personalizes your rate to you and the way you drive.

With UBI programs, you install a small telematics device in your car or use a mobile app to allow your insurance company to monitor your driving habits. The company evaluates how you drive and scores your driving. When you drive safely, they adjust your rates accordingly. 

The advantage of usage-based insurance is that it gives you more control over your auto insurance costs. Good driving habits keep you, your passenger and others safer on the road. That means you’re less likely to get in accidents that your insurance company may have to pay for. So, they can pass that savings along to you in the form of lower auto insurance premiums.

These Smart Driving Habits Can Lower Your Car Insurance Costs

With UBI, your car insurance company may evaluate your:

Speed

Driving at or slightly below the speed limit means you have more time to react to a dangerous situation, such as an erratic driver or an animal on the road, when every millisecond counts. Keeping your speed safe will improve your UBI score.

Braking and Acceleration

When you drive smoothly, without sudden stops or aggressive acceleration, it’s a sign that you’re paying attention to the traffic flow and anticipating what other drivers might do. So, UBI monitors how gently and consistently you slow down and speed up.

Cell Phone Use

When you use your phone, you’re likely to drive distracted. That means you’re not paying close attention to your driving and you’re more likely to be in an accident. It was found that texting or manipulating a phone made the risk of a crash four times more likely. UBI monitors your phone use, so minimizing use improves your score. (Many systems allow you to use your GPS or listen to music or podcasts, as long as you set up your phone before you start driving and don’t touch it during your trips.)

Other Factors That Influence Your UBI Score

Usage-based insurance may also log other factors like your driving habits:

Mileage

If you don’t drive that much overall, your odds of being in an accident are lower. So, if you work from home, aren’t sharing a car with other family members or rely on public transportation a lot of the time, UBI can track your total mileage and factor that into your rates.

Time of Day

Driving at night is riskier than daytime driving, since visibility is worse for you and for other drivers, and people are more likely to be tired. You can’t always control what time you drive, but keeping most of your trips to the daytime may help lower the amount you pay for car insurance. 

Find Out More About Saving Money on Auto Insurance

Can usage-based insurance save you money? For many people, it’s a good option. Most UBI monitors give you feedback, so you can improve your habits, score and savings. With Farm Bureau’s Driveology® program, you could save an average of more than 25% on your car insurance. Reach out to a Farm Bureau Insurance agent for full details.

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.