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Best usage-based insurance
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Advances in technology make it easier than ever for car insurance companies to track and perceive a driver’s risk to insure. This, in turn, helps the company set premiums based on risk-related driving metrics like miles traveled, speeding, driving time and cell phone use. Safe drivers can also benefit from usage-based insurance by getting the opportunity to earn discounts for safe and conscientious driving habits. Bankrate has identified five of the best options for companies with usage-based insurance (UBI) plans.
How does usage-based car insurance work?
Usage-based car insurance might help you earn significant premium discounts by allowing your driving habits to be tracked. Typically, this is accomplished through telematics programs that use apps or car plug-ins to track and store data about how you drive your insured vehicle. Drivers can typically earn savings on their car insurance premiums if the data shows they regularly practice safe driving habits. Keep in mind that some providers also reserve the right to raise premiums if the data shows unsafe driving.
Usage-based car insurance could be mutually beneficial for car insurance companies and drivers. The more you exhibit safe driving habits, the more you might save on your premiums. Opting for a usage-based policy not only provides a potential discount but also adds additional incentives for drivers to practice road safety and reduce claims risk for insurers. Behaviors that most insurers track in UBI programs include:
- Driving speeds: Most telematics programs check that drivers are obeying posted speed limits.
- Acceleration: Avoiding risky habits, such as accelerating too quickly, might reduce your risk of an accident and make you a safer driver.
- Braking: Insurers may see frequent hard braking as an indication of unsafe driving habits.
- Driving times: Some insurers may track the hours in which you typically drive, as certain times of day may provide less risky road conditions than others.
- Annual mileage: In general, the less you drive, the less likely you are to get into an accident or make an insurance claim. Because of this, insurers typically include driving less than the national average mileage in their evaluation of your total earned discount.
Although the idea of having your driving habits tracked may be nerve-wracking, looking through the metrics that individual telematics programs track and comparing these with your personal driving habits may help you understand how your driving habits could affect your insurance premiums. Some drivers may find that telematics programs encourage them to reduce high-risk driving activity.
Is usage-based insurance the same as pay-per-mile?
Although usage-based insurance and pay-per-mile insurance may have similarities, the policy types are quite different. With pay-per-mile policies, drivers typically pay a set amount per mile that they drive on top of a base rate set by the insurer. Comparatively, usage-based policies typically still use a traditional insurance policy structure, with a potential discount based on assessed driving habits. While both pay-per-mile and UBI programs may financially reward drivers with low mileage, telematics programs measure a broader scope of driving metrics.
The best usage-based car insurance
Usage-based insurance first debuted in the 1990s as a policy offering from mainstream auto insurance carriers. Today, most major auto insurance companies offer some form of telematics program.
In our search for the best usage-based car insurance, we identified five top auto insurance companies offering great UBI programs. Four are usage-based programs from national auto insurers that primarily sell traditional policies: Progressive Snapshot, Nationwide’s SmartRide, Geico’s DriveEasy, and Allstate’s DriveWise. The fifth is Root Insurance, a company created to offer more affordable car insurance rates by pricing premiums solely based on telematics. We’ve also included any available J.D. Power scores from the 2023 U.S. Auto Insurance Study for the best usage-based insurance to give you a sense of drivers’ satisfaction with each program. For context, the industry average in the study is 816 out of 1,000 possible points.
|J.D. Power Score (UBI)
|Impact on rates
|Telematics with a crash detection safety feature
|Rates may increase or decrease, except in NY
|Instant discount for sign-up and up to 40% per year
|All states except NY
|Automatic sign up discount
|Rates may increase or decrease based on state policies
|Up to 25%
|Available in 37 states and Washington, DC
|Telematics without the risk of a rate increase
|Rates may only decrease
|Instant 10% at sign up and up to 40%/year
|Available in all states except AK, CA, HI, LA, NY
|Rates may increase or decrease
|Average savings of $94 at sign up and $231/year according to Progressive
|Available in all states except CA. Sign-up discount is not available in HI or NC
|Drivers who know they like UBI programs
|Rates based on driving habits during a test drive period
|Average of $900/year compared to a traditional auto insurance policy
|Available in 34 states
|State Farm Drive Safe and Save
|Telematics without the risk of a rate increase
|Rates will not increase except based on mileage in some states
|Savings of up to 30% each renewal cycle (based on past 12 months of driving habits)
|Available everywhere except CA, MA and RI. Some drivers may not be eligible in NC.
Allstate offers Drivewise, its free telematics program, to auto policyholders. Drivers get an automatic discount for downloading the app and enrolling in the program. The app tracks driving habits, offers real-time audible alerts and notifies drivers about nearby collisions. Plus, you’ll get performance-based discounts every six months. Drivewise could be a useful tool for people who love getting instant feedback to improve their driving. Allstate came in with a slightly below-average score in the 2023 J.D. Power Auto Insurance Study for UBIs, and its program does allow for rate increases everywhere except New York.
Learn more: Allstate Drivewise review
Launched in 2019, Geico’s DriveEasy was a late arrival compared to similar products from competitors. To sign up for DriveEasy, you will need a Geico auto insurance policy and a smartphone. Participation requires downloading the DriveEasy app and keeping it installed on your mobile device as long as you are enrolled in the program. The app can detect when you are driving versus when you are a passenger and logs activities like speed, hard braking and hands-on phone use while behind the wheel. One unique aspect of DriveEasy is its family sharing function. Family members can review each other’s driving report cards and compete for the best driving score. DriveEasy is highly-rated in the 2023 J.D. Power U.S. Auto Insurance Study for UBIs, sharing the top score with State Farm and Progressive.
Learn more: Geico DriveEasy
Unlike many other telematics programs, your rates only have the potential to decrease with SmartRide. Most drivers see their discount kick in within 80 days. As a plus, Nationwide states that your discounted rate will continue as long as you maintain your auto insurance policy and the same insured drivers. SmartRide pays particular attention to nighttime driving habits since you have the highest chance of getting in an accident between midnight and 5:00 a.m. The company also notes that it also measures time spent in traffic, so you are likely to save more if you avoid congested roadways. It’s worth noting that Nationwide came in last place in J.D. Power’s 2023 U.S. Auto Insurance Study for UBI programs, indicating that customers may not be particularly satisfied with the program.
Learn more: Nationwide SmartRide review
Progressive Snapshot, available for free to Progressive customers, uses telematics data from either your smartphone or a company-supplied device that’s kept in your vehicle. Based on driving behaviors and information gathered, you may see your insurance rate increase or decrease. Though not available in all markets, the company’s Snapshot Road Test program may help drivers evaluate whether they would save money by switching to Progressive Snapshot. Progressive shares the top spot in J.D. Power’s 2023 U.S. Auto Insurance Study for UBI programs with State Farm and Geico, so it may be worth checking out.
Learn more: Progressive Snapshot review
Root Insurance is unique in the UBI market in that it exclusively provides usage-based policies. To determine rates, Root examines your driving habits during a trial period and extends quotes only to drivers who meet its safe driving criteria. The company claims that this process allows it to keep rates low for all customers by only insuring safe drivers. Because of this stipulation, Root may be especially appealing to those who commonly exhibit safe driving habits. Root’s innovative model earned it our 2023 Bankrate Award for Best Digital Auto Insurance Company. Perhaps because of its size, Root is not rated by J.D. Power.
Learn more: Root Insurance review
State Farm Drive Safe and Save
State Farm is the largest car insurance company in the U.S. by market share, so its Drive Safe and Save telematics program could be worth considering if you are already a customer. The program is fairly standard but offers savings of up to 30 percent off your policy. Additionally, you will not be penalized if you exhibit unsafe driving behaviors, although customers already enrolled in a low-mileage plan could lose that discount if the app shows you are driving more miles than you contracted for. Drivers who drive a 2020 or newer Ford or Lincoln can use the Connected Car option to connect to the program and program users can also use Alexa to check their status. Additionally, State Farm offers another usage-based program called Steer Clear for drivers under 25.
Learn more: State Farm Drive Safe and Save review
Is usage-based insurance right for me?
If you are a driver who practices consistently safe habits, you might save by switching to usage-based insurance or enrolling in a telematics program. If you are willing to adapt your habits to align with the behaviors your insurance company rewards, you may also consider enrolling in a usage-based program.
Drivers who are more aggressive on the road, who live in higher-risk areas or who regularly drive in heavy traffic may see less of a benefit, and potentially even a rate hike, with UBI. Additionally, not all carriers offer UBI programs in all states. Speaking with a licensed insurance agent may help you identify whether UBI could be right for you.