Usage-based insurance is one of the most commonly misunderstood insurance packages. When you mention the term UBI, most people relate it to insurance companies tracking your car usage. While some insurance companies track your driving habits, not all of them use the same approach. In this article, we will briefly discuss the meaning of usage-based insurance and how it works.
Usage-Based Insurance
Usage-based insurance is a kind of car insurance, which bases the cost of a policy on your safe driving habits. The insurer collects and analyzes data from the driver’s vehicle for the purpose of usage-based insurance. Based on the analysis, the insurer determines the amount of discount the driver is eligible to receive. The safer you are as a driver, the better will be the discount received.
How Does Usage-Based Insurance Work
UBI requires that you transmit your driving habits data to your insurance company. This can be made possible using built-in telematics systems like SYNC and OnStar. Your insurance company may also provide a device to plug into your car’s diagnostic port if it is incompatible with these systems. Alternatively, you can use your smartphone app to accurately track your driving habits.
Once you sign up for UBI, you will receive an introductory discount of 5 – 10%. Data is then collected for a period of up to 6 months to determine your driving style and estimate your discount. Based on the data collected, you may be offered a discount of up to 50% although most drivers fall between 10 – 15%. However, some companies do not increase premiums (surcharge) based on the results.
Is UBI Right for You?
Safe drivers who drive fewer miles compared to the average motorists benefit the most from usage-based insurance. This includes retirees, students, drivers who do not commute in a car, and stay-at-home parents because of their minimal driving time. Nonetheless, UBI will be good for you if you:
- Drive gently – Since many of the insurers track your driving style, you may be penalized for things like driving at high speed and braking hard.
- Drive less than 11,500 miles per year – This is the miles that average logs annually, and going beyond that will not save you any premiums.
- Don’t Mind Being Tracked – With a UBI, you are mostly going to be tracked by the insurance company to monitor your daily driving.
Need to Know More About Usage-Based Insurance?
If you want to know more about usage-based insurance in the greater Des Moines area, contact Jeff or Dan. We offer some of the most competitive insurance packages in Des Moines, Waukee, and all of Central Iowa. We will help you understand the concept of Usage-Based Insurance, the privacy issues involved, and how being tracked affect your premiums.
515-987-6993 or request a quote click here now.
