While for many, the use of vehicles remains a daily need, some disruptions and an emerging “new normal” are giving more and more people the option not to use their car every day. From working from home to moving into urban areas with robust public transit and a willingness to walk and bike more to “go green,” not everyone needs their car all the time. Usage-based insurance is made for these people, using technology to track automobile use to make people only pay for insurance based on their usage and driving habits. Learn how it works in this blog.
Defining Usage-based Insurance
Usage-Based Insurance (UBI) is a newer type of auto insurance that, instead of calculating your premiums based on averages or your personal driving history, uses tracking data to see how and how much you drive to calculate your policy pricing. Also known as Pay As You Drive (PAYD), Pay How You Drive (PHYD), and Mile-Based car insurance, these all paint a similar picture – auto insurance policies that use car-tracking technology known as telematics to calculate premiums.
The Technology Behind UBI
Similar to the GPS in your smartphone, telematics are devices attached to your car that wirelessly transmit back data to insurance companies. Often these plug into smart car’s diagnostic ports to provide additional data about the vehicle. The type of telematic can vary widely depending on the kind of policy you have and what data you consent to being tracked. A few common examples include.
- Distance: How much you drive in a given day.
- Time & Speed: The times you drive, their duration, and the speeds you drive at.
- Behavior: How often you go above posted speed limits, hard braking, and service lights.
- Location: Where you drive, including locations and types of roads.
One or more of these metrics are reviewed in terms of risk to adjust your premium costs.
Is UBI Auto Insurance Right for You?
There are a lot of misconceptions around telematics, including worries about them voiding your car’s warranty, invasive tracking, and a lack of trust from insurance companies. These devices are designed to track just the basics outlined in your premium, nothing more, and don’t void warranties. The idea is to provide you with just the coverage you need, customizing and dynamically scaling your insurance to just your needs, better aligning your premium with your actual risk. Talk to your insurer about your car usage and driving habits to see if UBI is right for you.
At the TJ Woods Insurance Agency, several of our carriers have UBI and telematics-based auto insurance plans that are great for those who don’t need to drive every day and rewards good drivers. Contact us to learn more, including what might work for your current needs, or dive right in with a free auto insurance quote. We can’t wait to hear from you!
