Nerdy takeaways
- Usage-based insurance is a car insurance program that allows your insurer to track your driving behavior in exchange for a discounted rate.
- Good drivers may be able to lower their rates by signing up for usage-based car insurance, but other drivers may see their car insurance get more expensive.
- Most large car insurance companies including Progressive, State Farm and Nationwide offer usage-based insurance.
What is usage-based insurance?
Usage-based insurance is more of a discount opportunity than a type of insurance. It uses “telematics” (a kind of data collection) to evaluate driving habits.
Car insurance companies generally offer a discount on your premium if you sign up for their usage-based insurance program. If you drive safely, you may receive an additional discount once you renew or after a trial period.
Risky drivers may see their rates go up, however. For example, two out of 10 drivers participating in Progressive’s usage-based insurance program see their rates go up, according to the insurer.
Your insurer may collect data about your driving using an app or a plug-in device. Insurance companies might evaluate your driving over a 90-day period or continuously.
Is usage-based insurance different from regular auto insurance?
No. Usage-based insurance considers your actual driving behaviors into how your auto insurance rates are calculated, but it provides the same coverage as a regular policy. If you sign up for usage-based insurance, you’ll still have the same insurance coverage. And just like regular auto insurance, your driving record, vehicle and other personal factors still affect your insurance costs.
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Each insurance company offers different discounts and may not track the same driving behaviors. Availability of usage-based insurance programs varies by state, so it’s not guaranteed that all insurers will offer it in your state, even if they sell standard car insurance there. Check the table below for major car insurance companies with usage-based programs, information on whether rates can increase after participation, advertised discounts, and availability. following sentence:
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