How does pay by the mile insurance work?

Traditional auto insurance pricing blends actuarial data with factors like driving record, age, garage location, vehicle type, mileage, and more. UBI insurance is more individualized, allowing information collected by data sensors to affect premium. These telematic devices constantly record driving behavior like speed, rapid acceleration, sudden braking, and hard cornering as well as miles driven, time of day and locations driven to.

Here are some points to consider before switching to UBI insurance:

  1. Privacy. Confirm what data the insurer is collecting. Be sure you are comfortable with your insurance provider amassing this information.
  2. Driving habits. Composed drivers that follow the rules of the road are better suited to UBI than aggressive motorists. In addition, high mileage commuters may not experience significant savings.
  3. Cost. Compare the usage-based insurance rate to traditional auto insurance pricing. Find out if the credit is applied up front or when the policy renews.
  4. Other benefits. Vehicle tracking may enable the insurer to provide extra services. This could be roadside assistance, periodic reports on driving habits (which might be surprising), recovery assistance if the vehicle is stolen, and fault assessment following a crash.
  5. Data collection process. Find out if the insurer places a telematic recording device in your vehicle, gathers information through a smartphone app, or access factor equipment already installed in your vehicle.