Best usage-based insurance
The average U.S. driver puts more than 13,000 miles on their car per year, naturally making most drivers more vulnerable to car accidents and resulting injuries and damages. While insurers expect this level of risk, any opportunities to reduce risk where possible are generally beneficial for both the insurer and the insured. Because of this, usage-based car insurance policies may be especially appealing for the right kind of driver.
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 low base rate set by the insurer. Comparatively, usage-based policies encompass multiple use factors, namely driving habits and mileage. Instead of having a base rate, drivers could receive a discount off their premium based on their assessed driving over their policy’s term.
Just like any car insurance policy, there are multiple options available to drivers. However, it may be hard to narrow down which companies offer the best deal for coverage. Bankrate’s insurance editorial team keeps close tabs on the insurance market to continually provide up-to-date policy evaluations and help drivers in their decision-making process. Below, we highlight some of the best usage-based insurance car policies currently being offered.
How does usage-based car insurance work?
Car insurance can be costly, and most drivers like to be rewarded with savings where they qualify. Usage-based car insurance provides an option for drivers to earn significant premium discounts by allowing their driving habits to be tracked. Typically, this is accomplished through telematics devices or car plug-ins, which connect with providers’ mobile applications to store the data.
Because car insurance provides financial assistance in case of car accidents, among other incidents, usage-based car insurance can be mutually beneficial for both insurance companies and drivers. The more you exhibit safe driving habits, such as avoiding speeding, the more you could save on your premiums. Opting for a usage-based policy not only provides a potential worthwhile discount but also adds additional incentives for drivers to practice road safety and reduce claims risk for insurers. Behaviors that most insurers track in these types of policies include:
- Driving speeds: When you maintain proper speed limits, you could increase an insurer’s perception of you being a safe driver.
- Acceleration: Avoiding risky habits, such as accelerating too quickly, could reduce your risk of an accident and make you a safer driver.
- Braking: Hard braking often signals 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 are likely to include driving less than the national average mileage in their evaluation of your total earned discount.
Although the idea of having a tracking device installed in your vehicle may be nerve-wracking, most insurers do not use the data collected to raise your insurance premiums. Instead, telematics is mainly used to encourage safe driving and reduce the chance of high-risk activity. When you opt to use a tracking device, you are likely to earn double-digit discounts simply by exhibiting safer behaviors.
The best usage-based car insurance
Usage-based insurance first debuted in the 1990s as a policy offering from mainstream auto insurers. Drivers have many more options to choose from these days, including a handful of companies that exclusively sell pay-as-you-go car insurance.
In our search for the best usage-based car insurance, we identified four top carriers. Three are usage-based programs from national auto insurers that primarily sell traditional policies: American Family’s KnowYourDrive, Nationwide’s SmartRide and Geico’s DriveEasy. The fourth is Root Insurance, a company created to offer more affordable car insurance rates by pricing premiums based on how drivers use their vehicles.
American Family: KnowYourDrive
American Family’s usage-based program, KnowYourDrive, provides an option for drivers looking to both learn and save. Drivers begin saving immediately after enrollment, with up to a 10% discount for signing up and a chance to earn up to 20% more off their premiums. But as the name suggests, KnowYourDrive focuses on more than just the savings it can offer.
The mobile application for the program is intuitive and displays insights for you and the other insured drivers on your policy to continue making safe driving decisions. The app tracks both short and long-distance trips to log information regarding where you excelled in safe practices and where you have room to make improvements. This way, instead of just receiving a score and final discount, you have tips and tools to help you become a better driver overall.
Whether your policy includes just you or several of your family members, each driver listed on the policy can contribute to the discount. While this could make it harder to achieve a certain level of savings since a portion of the tracked behavior will be out of your hands, it could lead to each driver being more aware of how their habits impact the entire policy. As long as you choose to stay enrolled in the program, you could continue to receive discounts within the set 2-20% range, based on the app’s insights. As a bonus for enrolling in KnowYourdrive, there is also a chance for you to qualify for a free American Family travel package, which includes coverage like rental reimbursement and accidental death and dismemberment benefits.
The most impressive aspect of Nationwide’s SmartRide may be how much your rates can go down through the program. Savings start the moment you sign up with an instant 10% discount on your existing Nationwide policy. Based on the results of your driving analysis, you could end up with an additional 40% discount.
SmartRide is available as either an app or a separate device you install in your vehicle, making it an option for drivers without smartphones. Having a separate tracking device may also be a good option for drivers taking advantage of multiple Nationwide usage-based programs. The SmartRide program tracks the number of miles you drive and heavily considers vehicle usage in determining your discount. Particular attention is paid to nighttime driving since you have the highest chance of getting in an accident between midnight and 5:00 a.m. Nationwide notes that they also measure time spent in traffic, so you are likely to save more if you avoid congested roadways. Accelerating too quickly or slamming on the brakes, however, could lose you points.
Whichever option you choose, you will have to complete a four- to six-month program, in which Nationwide tracks and updates your driving discount weekly. Once complete, your discount can be applied to your policy. 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.
Launched in 2019, Geico’s DriveEasy was a late arrival compared to similar products from competitors. However, the program has already gained a loyal following due to the savings many participants earn. Drivers who enroll in DriveEasy could have their premiums reduced significantly based on factors like how far they commute and their behaviors on the road.
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. Of course, Geico also monitors how much time you spend on the road. The less you drive, the lower your rate could end up being.
One unique aspect of DriveEasy is its family sharing function, a feature that is particularly handy for parents to keep an eye on teen drivers. Family members can review each other’s driving report cards and compete for the best driving score.
Unlike other car insurers that primarily write policies based on standard underwriting practices and have usage-based options, Root Insurance exclusively provides usage-based policies. This could be advantageous because you do not need to enroll in a standard auto policy before finding out how much you will save. Root advertises that customers can save an average of $900 annually by making a switch and allows you to download its app and complete a driving analysis while still covered by your current insurer. After a two- to three-week test drive, you could receive a Root quote if you live in one of its 30 covered states and compare it to your existing rate.
To determine rates, Root examines both your vehicle usage and the habits you exhibit while driving. These include driving hours, smooth turning and braking and a level of uninterrupted focus while driving. Although these factors are common amongst usage-based policies, Root makes them particularly important. The company may deny offering quotes or coverage to drivers who do not score favorably on their test drive. Because of this stipulation, Root may be especially appealing to those who commonly exhibit safe driving habits.
The concept for Root’s insurance approach is that having fewer risky drivers in the insurance pool means everyone who is admitted pays less overall. And because Root is primarily dedicated toward a safer driving group, drivers who are not extended coverage may feel better knowing they are not being overcharged for a Root policy and could even use the test as a starting point to gauge and alter their driving behaviors.
Frequently asked questions
How does usage-based insurance work?
Usage-based car insurance is a type of policy that uses either your smartphone or a telematics device to track your driving habits and determine your rate. These programs usually consider two types of factors: the number of miles you drive and how safe you are on the road. Generally, the safer your driving habits, the more you could earn back on your premium.
Can paying for car insurance by the mile lower my rate?
Safe drivers who do not use their car frequently tend to save money with usage-based insurance. However, there is no guarantee that this will always be the case. The best way to find out is to complete a test drive with the tracking device and get a quote based on your score. Some insurance companies offer pay-per-mile insurance policies that focus exclusively on how much you drive.
Do I need to have a smartphone to enroll in pay-as-you-go car insurance?
Most insurance companies require you to download an app to participate in their usage-based program, which means having a smartphone handy and in your vehicle during drives could be necessary. Other insurers, like Nationwide, do give you the option of installing a small device in your car instead. In this case, a smartphone may not be necessary but could provide a more accessible way to see your habits and progress toward a discount.