Usage-Based Insurance

Updated: 29 February 2024

What Does Usage-Based Insurance Mean?

Usage-based insurance (UBI) refers to car insurance that allows the insurance company to track the driving behavior of the insured by placing a monitoring device inside their car. Rather than being charged a premium based on their risk class, the rate insured pays is determined in part by the information provided through the device.

Insuranceopedia Explains Usage-Based Insurance

Usage-based insurance is a new way to lower the cost of car insurance. By using a telematics device to monitors the behavior of the driver and the condition of the vehicle, insurance companies that sell UBI can lower the price of premiums if the data collected shows that the policyholder has safe driving habits.

The data supplied through UBI can also promote good driving by alerting the driver to behaviors that may be dangerous. This form of insurance, then, can prevent accidents not only for the insured but also for other motorists.

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