Behavior- versus usage-based car insurance

When you add up monthly car payments, the price of fuel and routine maintenance costs, it's easy to see why driving a vehicle can get quite expensive.

Understanding the Costs of Driving and How to Reduce Them

The expenses associated with owning and operating a vehicle, including monthly payments, fuel, and regular maintenance, can be substantial. To help drivers manage these costs, the insurance industry offers programs designed to reward safe driving practices and lower mileage.

One such program is behavior-based insurance (BBI), which monitors driving habits. This type of insurance analyzes various data points such as the time of day you drive, the distance traveled, your speed, braking patterns, phone usage, and how you handle your vehicle on corners. By collecting and analyzing this information, BBI programs aim to identify safer drivers and offer them discounts on their auto insurance premiums. The data collected is typically confidential and used to assess risk over time, rather than to penalize minor infractions.

Another option is usage-based insurance (UBI), also known as pay-per-mile insurance. This program is particularly beneficial for individuals who drive short distances or infrequently. UBI programs typically utilize a mobile app that employs telematics technology to track mileage and other driving factors. Policyholders generally pay a base rate, with an additional premium that adjusts based on how much they drive, rewarding lower mileage with potential savings.

How does BBI work?

BBI programs work by rewarding you for establishing a long-term pattern of safe driving habits, like keeping your hands off your phone while driving and leaving enough distance between yourself and the cars in front of you. Over time, your driving behaviors are analyzed and potentially rewarded with discounts on your auto insurance premiums.

Advantages of BBI

One of the main advantages of behavior-based program is that if you're a safe driver, you can save on your auto insurance policy — and that's in addition to other cost-cutting options, like bundling your home and auto insurance.

Another benefit is that if you have a newly licensed high school or college-age student insured on your auto insurance policy, BBI gives them an added incentive to drive carefully, too.

What is usage-based insurance?

Another option designed to save drivers money is usage-based insurance, or UBI, program. These programs are also known as per mile insurance or car insurance by the mile, with rates determined by how often you drive. Most insurance carriers a usage-based program that offers savings for lower mileage and safe driving.

How does UBI work?

UBI programs typically require a mobile device app that uses telematics technology to track driving habits. Policyholders typically pay a flat rate along with an additional premium that increases based on a pre-negotiated set of mileage parameters. The rates for this car insurance premium can be adjusted depending on how much or little you drive each year.

Who's usage-based program best suited to?

Usage-based insurance can be a great option for:

• Seniors who only drive occasionally to see family, friends or medical specialists.
• Urban residents who live in the city and only need to drive when other options like public transportation aren't available.
• Students who spend part of the year on campus and only drive when they're at home in between semesters.
• Multiple vehicle owners who drive a more expensive car during the summer months and a less expensive car during the winter months.
• Seasonal workers who live part of the year at sea or abroad, or who work in a similar capacity where they go long periods without driving.
• Drivers with a history of accidents who may choose to drive less to avoid the high fees associated with a full-time driver policy.

BBI versus UBI

Determining which program is best for you is a personal choice. For those who drive frequently, BBI can provide discounted auto insurance rates for safe, responsible driving. UBI offers affordable auto insurance rates for safe, responsible drivers who only drive occasionally.