Pay-as-you-drive usage-based insurance discounts

How does a pay-as-you-drive discount work?

Pay-as-you-drive is a type of usage-based insurance (UBI).

“Usage-based insurance monitors drivers’ actual driving behaviors and transmits those to the insurance company,” says Brenda Wells, director of the risk management & insurance program at East Carolina University. “[While} UBI still uses the factors for regular auto insurance, it also adds in the insured’s actual driving performance.” 

“The monitoring device, usually a cell phone with a special app installed, measures things like miles driven, time of day driven, speed, hard braking, taking curves too fast, etc. This data gives the insurance company the ability to add actual driving performance to the list of risk indicators used to calculate the premiums,” she says 

The monitoring systems are known as telematics. If the data collected is favorable, you could earn discounts ranging from 10% to 40%, depending on the insurance company. You are usually awarded discounts every six months or upon policy renewal.

Bear in mind that any discounts depend on being a safe driver, which means not speeding and obeying all traffic laws. “UBI can lower your premiums if you’re a safe driver. If you’re not, or if you drive a lot of miles that the insurer otherwise would not know about, UBI can actually increase your premiums,” she says. 

Not all companies will charge higher premiums based on telematics data.

What is usage-based insurance?

Usage-based insurance (UBI), also called pay-as-you-drive, is based on how much you use your car and how you drive. The insurance company tracks your driving and then charges you accordingly, applying discounts for maintaining low mileage and being a safe driver. Depending on the insurance company, this could happen every six months or whenever your policy renews. 

Most carriers factor in your speed, how much or how hard you brake, whether or not you pick up your phone a lot – which is a sign of distracted driving – and other things like acceleration habits. They also look at what time of day you drive. Driving during peak rush hour or on holidays is a negative factor, as is driving in the middle of the night, as statistically, many accidents happen during those hours.

Pay-per-mile programs are also available, which track your actual mileage and charge you a set rate for each mile you drive. These programs track only mileage and not driving habits.

Pay-as-you-drive car insurance companies: Which companies have usage-based programs?

The following companies offer usage-based programs, although they may not be available in every state. Each company weighs different factors of your driving, such as speed, braking and what time of day you drive. Remember, negative driving habits can drive up your rates for all of these programs. People who participate generally do so because they are safe drivers and can take advantage of discounts.

*Note that top-end discounts are often difficult to attain, requiring excellent driving habits. Most drivers see smaller discounts.

Allstate

Allstate offers usage-based insurance through its DriveWise mobile app. Upon activating the app, you receive a discount, and every six months, you are rewarded with credits for safe driving. Discounts range from 10% to 40%. 

Rates may go up for risky driving habits.

American Family

American Family Insurance offers the DriveMyWay program via its mobile app to offer usage-based and safe driving discounts. You will get a 10% discount just for activating the app. After that, drivers can save 5% to 20% on their car insurance if they’re safe drivers. This program is only available in about 20 states.

Rates may go up for risky driving habits.

Esurance

Esurance offers usage-based discounts through its DriveSense mobile app. You get a discount for signing up, and as long as you record 50 trips in the given policy periodThe time period during which an insurance policy is in force. An auto insurance policy period begins and ends at 12:01 AM in the local time zone., you’ll get a discount for safe driving and low mileage. Esurance doesn’t disclose how much its discounts are; they are personalized depending on your policy and data, but they can be up to 30%.

Rates can’t increase due to recorded driving habits.

National General

National General has usage-based insurance called DynamicDrive, which monitors your driving through a mobile app. It offers an immediate 10% discount for enrolling. As with most of these types of usage-based insurance programs, how much you drive, when you drive (time of day) and how you drive all factor into your rates.

Rates may go up for risky driving habits.

The Hartford

The Hartford offers TrueLane via a mobile app. Discounts range from 15% to 40% for safe driving. The mobile app records data on braking, speeding, and phone distraction. 

Rates can’t increase due to recorded driving habits.

Progressive

SnapShot, offered by Progressive, offers an automatic discount when people sign up for the program. The company website states that safe drivers save an average of $231 a year using SnapShot.

Rates may go up for risky driving habits.

Safeco

Safeco’s Rewind program is aimed at users with less-than-perfect driving records. If you sign up for Rewind and have a period of safe driving, Safeco will waive higher rates imposed for previous incidents like a speeding ticket. Rewind uses a plug-in device, which customers need to mail back to get their results, rather than an app to track driving habits.

Rates can’t increase due to recorded driving habits.

State Farm

State Farm has DriveSafe, which monitors your driving through a mobile app. According to their website you can enjoy an initial discount of 10% for signing up and then up to 30% after that for safe driving.

Rates may go up for risky driving habits.

Travelers

IntelliDrive is Travelers’ version of a usage-based insurance discount program. Through a mobile app, IntelliDrive captures information on your driving habits, including the time of day, your braking habits, your speed, distracted driving, and acceleration. Discounts can be as high as 30%.

Rates may go up for risky driving habits.

Nationwide

Nationwide’s SmartMiles program tracks these driving habits: hard braking and acceleration, miles driven, idle time (stopped in traffic), and night driving. The company states that discounts of up to 40% are available and offers a discount of 10% just for signing up. 

Rates can’t increase due to recorded driving habits.

What’s the difference between usage-based car insurance, pay-as-you-go car insurance, and pay-per-mile car insurance?

Usage-based car insurance is any car insurance program that bases rates on how you drive. Pay-per-mile car insurance is a little different. Your insurance company will charge you a certain mileage rate, for example, 80 cents per mile, as well as a base rate. This is designed for low-mileage drivers who have a very predictable, low-mileage driving schedule.

You can track your miles in the same way as the usage-based programs via a mobile app or with a “connected car,” which can connect to the insurance company's telematics system. This device is added to your car to track your driving.

Both usage-based and pay-per-mile programs are sometimes called pay-as-you-go, but it most often refers to a plan where you pay based on actual miles drive.

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