Usage-Based Insurance in 2025 (Breaking Down the Facts)

Usage-based insurance discounts can help you save up to 40% on your car insurance, but only safe drivers get the full discount.

Most insurance providers offer a UBI discount to help their customers save, but the maximum amount you can save depends on your company and where you live. Usage-based car insurance is not available everywhere.

Read on to learn how usage-based insurance works and where to find cheap usage-based auto insurance companies. Then, enter your ZIP code into our free comparison tool to find the best deals in your area.

How Usage-Based Insurance Works

Usage-based insurance (UBI) is a type of auto insurance discount based on your driving habits. UBI typically relies on telematics technology, which uses a mobile app or a device installed in the vehicle to monitor driving behavior. As long as you drive safely, a UBI program is one of the easiest ways to get the best auto insurance for good drivers.

To help drivers save, most companies offer some form of usage-based insurance program. You can compare some of the top UBI programs below.

Top Usage-Based Auto Insurance (UBI) Programs

Signing up for one of these UBI programs is usually easy, but you’ll need to be comfortable with your driving being tracked. In order to determine your discount, companies track some or all of the following:

• When you drive
• Speeding and acceleration
• Hard braking
• Phone use
• How much you drive

Depending on the company, you’ll either need to install an app on your phone or insert a tracking device into your car’s OBD port.

It’s important to compare your options before you sign up for a UBI program. For example, most UBI programs guarantee your rates won’t go up if you’re not a safe driver, but that’s not true of every company. Also, some companies penalize phone use while driving while others do not.

Getting started with usage-based insurance is typically easy. Simply visit your provider’s website to start the sign up process.

If you’re looking for new insurance, you’ll fill out a quote request form for a normal policy. Most companies offer new customers the option to sign up for UBI when they purchase a new policy.

Usage-Based Insurance Rates

When you sign up for usage-based car insurance, you might qualify for a significant discount. Check below to see usage-based insurance costs for the average driver.

Usage-Based Insurance Monthly Rates by Provider & Coverage Level

Usage-based insurance benefits include being able to combine other discounts to further increase your savings. For example, many drivers who earn a UBI discount also qualify for a good driver discount.

Depending on how many discounts you qualify for, you can cut your normal insurance rates by a significant amount. Make sure to check with an insurance representative from your provider to ensure you’re getting all the auto insurance discounts you qualify for.

Usage-Based Insurance Pros and Cons

Like most things in life, usage-based insurance comes with pros and cons. Understanding these pros and cons can help you make the best choice for your driving situation. First, take a look at the benefits of usage-based insurance:

• Lower Rates: The best reason to sign up for a UBI program is that you’ll have the opportunity to lower your insurance rates.
• Encourages Safe Habits: For many drivers, knowing their driving habits are being tracked encourages them to drive safer.
• Driving Tips: Many UBI programs offer personalized tips based on previous trips to help you boost your driving score and earn a larger discount.

The driving improvement tips that are often included in UBI apps make these programs appealing to parents and guardians with teenage drivers.

While many drivers enjoy affordable usage-based insurance, it’s not for everyone. The disadvantages of signing up for a UBI program include:

• Privacy Concerns: You’ll need to agree to have your driving tracked to enroll in UBI, which includes where you go. Some drivers simply aren’t comfortable sharing this information, even when their provider has one of the best auto insurance apps.
• Increased Rates: While most companies don’t raise your rates, some providers charge more if you sign up for UBI and drive recklessly.

The good news is that you’ll likely have a trial phase to decide if you like the UBI program your provider offers. If you don’t, you can cancel your enrollment without your rates changing.

Usage-Based Insurance vs. Pay-Per-Mile Insurance

Although they’re a type of usage-based insurance, pay-per-mile insurance policies are different than the discount. While the best low-mileage discounts can help you save a bit, a pay-as-you-go plan offers much better savings.

With pay-per-mile insurance (also known as pay-as-you-go insurance), your rates are determined strictly by how much you drive. What you pay monthly for your insurance is a combination of two prices. The first is a flat fee you pay no matter what. The second is a per-mile fee, usually just a few cents.

For example, if your flat fee is $35 per month and you’re charged $.05 per mile, your insurance bill would be $60 for a month you drove 500 miles.

Usage-based insurance tracks annual mileage but also considers a host of other driving behaviors. Additionally, UBI programs offer a discount on a traditional policy, while pay-per-mile plans are standalone policies.

Find the Best Usage-Based Insurance Companies Today

A usage-based insurance discount can help you lower your car insurance rates, but you’ll need to regularly practice safe driving habits to qualify for the best discount. Companies like Nationwide and Allstate have the best UBI discounts, but most providers offer at least a small UBI discount.

Now that you know how usage-based insurance works, your next step should be to compare rates with the cheapest auto insurance companies. Use our free comparison tool to find affordable coverage in your area by entering your ZIP code.