- Explains what usage-based car insurance (UBI) is and why insurers ask how often, how far and why you drive.
- Shows how mileage, commuting, business use and where you keep your car can all affect your premium.
- Breaks down the difference between traditional pricing factors and usage-based car insurance programs that track driving habits.
- Answers common questions about whether usage-based insurance may make sense for low-mileage and safe drivers.
Pay-per-Mile or Usage-Based Car Insurance
Insurance companies decide what you'll pay for car insurance based on how you use your vehicle, how much you drive and your driving history. Some insurers also offer usage-based car insurance programs that use driving data to help personalize pricing.
Key Takeaways
Auto insurance rates aren’t one-size-fits-all. The price you pay can vary based on how you use your vehicle, how much you drive and your driving history. Some insurers also offer usage-based car insurance programs that use driving data to help personalize pricing.
Quick takeaway: Car insurance rates vary because insurers consider how you use your vehicle, how much you drive and your driving record. Some also offer usage-based programs that use driving data to personalize pricing.
What is usage-based insurance?
Usage-based insurance is a type of auto insurance pricing program that may use mileage, driving behavior or both to help determine discounts or rates. Usage-based car insurance programs vary by insurer. Some track only mileage, while others monitor specific driving behaviors.
For example, some usage-based car insurance programs may track things like hard braking, rapid acceleration, speeding, phone distraction or when you tend to drive. In general, drivers who spend less time on the road or show safer habits may benefit most.
If you want to compare broader pricing factors too, see “What Is an Insurance Score?” and “How to Compare Car Insurance Rates”.
Questions to consider when deciding on usage-based insurance
Usage-based insurance programs reward drivers who stay off the road or drive safely. But before you enroll, it helps to understand how insurers view your driving habits. The following questions can help you decide whether a pay-per-mile or telematics-based policy fits your lifestyle.
Do you use your vehicle for work?
How often and why you typically use your vehicle can affect how much you pay for insurance.¹ If your job keeps you on the road, you’re likely to have higher annual mileage than someone who only drives a short distance to work. More time on the road can mean more exposure to risk, which may lead to a higher rate.
This is one reason insurers ask whether you drive for commuting, business or pleasure. A car used every day for long trips may be priced differently than one used occasionally for errands.
Do you use your vehicle less frequently?
On the other hand, if you drive less because you work from home or mostly use your car for short trips, your premium could be lower. Lower mileage can mean fewer chances to be involved in an accident.
That’s why low-mileage drivers sometimes look into usage-based insurance or usage-based car insurance programs. Using technology referred to as telematics to capture driving behavior, these programs may reward people who drive less, drive more safely or both. To learn more about how telematics fits into that model, see “What Is Telematics?”.
Where are you driving?
Insurers may also consider where you live or where the vehicle is garaged when determining the price of your auto policy. If you live in a densely populated area with heavy traffic, your rate may reflect that added risk.² Whether you live in an urban or rural area and park in a garage or on the street can also affect what you pay for auto insurance.¹
| Factor | Why it can affect your rate |
|---|---|
| Annual mileage | More driving can mean more exposure to accidents. |
| Vehicle use | A car used for commuting or business may be priced differently than one used for pleasure. |
| Garaging location | Traffic, theft risk and where the car is kept can all influence pricing. |
| Driving habits in a usage-based insurance program | Some usage-based car insurance programs may look at habits like braking, speed, time of day or phone distraction. |
What’s in your driving history?
To calculate your auto insurance rate, insurance companies also look at your driving record. Your rate may change based on whether you have a clean driving history.¹ If you do, you may qualify for a lower rate because you’re generally seen as less likely to have accidents or violations in the future.
On the other hand, if you have a history of traffic violations, a suspended or revoked license, minor collisions or major car accidents, you may receive a higher rate because insurers may see you as more likely to have similar incidents in the future.²
If you’re looking for ways to improve your rate over time, it may help to review “How to Lower Your Car Insurance Costs”, “Does a Speeding Ticket Affect Your Insurance?” and “Safe Driving Tips to Lower Your Insurance Costs”.
Could usage-based car insurance be worth it?
Usage-based insurance may be worth considering if you don’t drive often, have a short commute or are comfortable joining a program that uses driving data. It may also appeal to drivers who want their driving habits to play a bigger role in how they’re priced.
Usage-based insurance may be a good fit if:
- You drive less than 10,000 miles per year
- You have a short or occasional commute
- You're comfortable with an app or device tracking your driving
- You rarely brake hard or speed
If you’re interested in an Amica option, you can learn more about “StreetSmart by Amica™”, or explore “Auto Insurance Discounts” and “Car Insurance Policies”.
Get an auto insurance quote today
FAQs
Usage-based insurance is an auto insurance program that may use mileage, driving behavior or both to help personalize pricing or discounts.
Usage-based car insurance programs generally collect driving information through a mobile app, plug-in device or similar technology. Depending on the program, that information may include miles driven, braking, speed, time of day or phone use while driving.
It can. Lower mileage may mean less time on the road and fewer chances for an accident, which can help reduce risk.
They’re closely related. Telematics is the technology that may be used to collect driving data, while usage-based insurance is the pricing model or program that uses that information.
Low-mileage drivers, people with short commutes and drivers with consistently safe habits may be the best fit for usage-based insurance programs.
What Determines the Price of an Auto Insurance Policy?, Insurance Information Institute.
How Auto Insurance Companies Calculate Risk, DMV.org.
Your Policy, Policy Declarations or Amended Declarations in effect on the date of loss is the primary source of reference for your coverage, coverage limits and deductible amounts.
This inclusion of non-Amica companies, products, services or statement herein (“Third-Party Content”) is for general informational purposes only and does not constitute a recommendation or endorsement by Amica Insurance. Policies, views, opinions or positions of Third-Party Content expressed herein are those of the authors and do not necessarily reflect the policies, views, opinions or positions of Amica Insurance. Amica Insurance makes no warranties, expressed or implied, as to the accuracy and reliability of Third-Party Content.
This content may contain helpful tips, explanation and advice. Your use of this information is voluntary and may not be effective in every circumstance. Amica encourages you to use good judgment and put safety first.
For more information on our editorial process and content standards, take a look at our editorial guidelines.
AMIC-02-051127