How to Use a Usage-Based Insurance Program

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A usage-based insurance program puts the power of data behind your car insurance premiums. In simple terms, it rates your insurance costs by how much you drive, and what kind of driver you are, giving you a more accurate bill each time you renew your policy.
While they vary by provider, many usage-based insurance programs rely on your car’s onboard diagnostic (OBD-II) port to track mileage, braking and acceleration ferocity, and time of day. Others rely on your car’s already installed onboard telematics system, such as OnStar or SYNC, to track this data while some insurance companies still take simple, analogue measurements of your odometer.

Compare Available Usage-Based Insurance Programs

Because they’re more common now, it’s likely your current car insurance company already offers a usage-based system. According to The Center for Insurance Policy and Research, there are at least five insurance companies offering usage-based car insurance programs in 23 states alone. This should make accessing one easier than ever. Just call your current provider to get more details, but it’s still important to get quotes from neighboring companies to comparison shop.
When you do this, have the important questions at your side, including:
  • Is a usage-based car insurance program available in my state?
  • What tools do you use to track my usage?
  • Do you track more than just mileage?
  • Do you take a snapshot of my driving habits, or do you track continuously?
  • What is the maximum savings I can receive?
  • How do you protect the privacy of my data?
  • Can my rates actually increase from this?

Pick the Usage-Based Insurance Program That’s Right for You

Whether or not you switch insurance companies to get the most savings with a usage-based car insurance program, you’ll want to take advantage of one strategically. This is especially true if the program you pick takes a “snapshot” of your driving habits.
More than one insurance provider does this by giving you a tracker for six months — usually in the form of a onboard plug-in device - to then apply that data to your premiums. This is a great option for people who might not feel comfortable about a device that’s constantly tracking your driving behavior.
If you do go with the constant monitoring route, your driving needs to be “safe” from the start. This means careful acceleration and braking, no late-night driving, and yearly mileage typically less than 12,000. If this seems like you, then you likely will see the most benefit from a system that stays connected to your car all the time.
Another “no-brainer” is the method that taps into your car’s already installed telematics system. For example, State Farm may offer tracking services for drivers with SYNC-equipped Ford vehicles, eliminating the need for an extra plug-in device.
Usage-based car insurance programs are a great way to save, but taking advantage of one can be tricky. For some, this is a great way to save some money but it’s not for everyone.

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