Quick answer: usage-based insurance (UBI) prices your car insurance partly on data about your actual driving, collected through a smartphone app, a plug-in device or your car’s built-in connected system. There are two main types: behavior-based programs that score braking, speed, phone use and time of day, and pay-per-mile programs that charge a base rate plus a per-mile rate. Low-mileage, careful daytime drivers are most likely to save. Some programs can also raise rates for risky driving, and all of them collect data, so read the program terms before enrolling.
Traditional car insurance pricing relies on proxies: your age, where you live, your vehicle, your driving record and, in most states, a credit-based insurance score. Usage-based insurance adds something more direct, which is how you actually drive. For some drivers that means real savings. For others, it means sharing a lot of data for a small discount, or even a higher rate.
This article explains how usage-based programs work, what they measure, who benefits and what to ask before you sign up. For the full picture of coverage, pricing and shopping, see our complete car insurance guide.
This is general educational information. Pro Insurance Info is not an insurance company and does not endorse any specific insurer’s program. Sources: National Association of Insurance Commissioners (NAIC) consumer information on usage-based insurance; Insurance Information Institute (III); published program terms from major insurers; Federal Trade Commission (FTC) announcements on connected-car data; California Department of Insurance regulations. Program details change often, so confirm current terms with the insurer. Checked October 2026. Questions: hello@proinsuranceinfo.com.
What Is Usage-Based Insurance?
Usage-based insurance is any auto insurance pricing that uses data from your actual driving. The NAIC describes it as a way for insurers to align premiums more closely with individual driving behavior and mileage, instead of relying only on group statistics.
UBI is not a separate type of coverage. You still buy the same liability, collision, comprehensive and other coverages. The difference is in how the premium for those coverages is calculated, and in the data you share with your insurer to get that price.
Most major U.S. insurers offer some form of UBI. Well-known examples include Progressive Snapshot, State Farm Drive Safe & Save, Allstate Drivewise, Nationwide SmartRide and several pay-per-mile options such as Nationwide SmartMiles and Allstate Milewise. Names, features and state availability change, so check what is offered where you live.
The Two Main Types of Usage-Based Programs
| Feature | Behavior-based (telematics) | Pay-per-mile |
|---|---|---|
| What it prices | How you drive, plus some mileage | Mainly how much you drive |
| How you pay | Standard premium with a discount or adjustment | Monthly base rate plus a cents-per-mile charge |
| Data collected | Braking, acceleration, speed, time of day, phone use, mileage | Mileage, sometimes also driving behavior |
| Best fit | Careful drivers at any mileage | Low-mileage drivers |
| Can the price rise? | With some programs and in some states, yes | Yes, if you drive more miles |
Behavior-Based Telematics
Behavior-based programs track how you drive for a set period, often a few months, or for the life of the policy. They usually score:
- Hard braking and rapid acceleration, which are linked with following too closely and aggressive driving.
- Speed, either absolute speed or speeding relative to the posted limit.
- Time of day, since late-night driving tends to carry higher crash risk.
- Phone use while driving, detected through the app.
- Mileage, since more time on the road means more exposure to crashes.
At the end of the monitoring period, the insurer uses the score to set a discount or, in some programs, a surcharge.
Pay-Per-Mile Insurance
Pay-per-mile programs charge a fixed monthly base rate plus a per-mile rate. If you drive very little, your bill drops. If you take a long road trip, it rises for that month, though many programs cap the miles counted in a single day. These programs fit people who work from home, retirees, city residents who rarely drive and households with a second car that mostly sits parked.
How Data Is Collected
Insurers use three main methods:
- Smartphone apps. The most common method today. The app uses your phone’s GPS and motion sensors to detect trips and driving events. You may need to keep location services and Bluetooth turned on.
- Plug-in devices. A small device plugs into the car’s OBD-II port, usually under the dashboard. It records mileage and driving events directly from the vehicle.
- Connected car systems. Many newer vehicles can share data from the car’s built-in system with an insurer, if you opt in through the automaker or insurer.
Each method has tradeoffs. Apps can sometimes mistake a passenger trip for driving, which you may be able to correct in the app. Plug-in devices only track the car they are in, not the driver. Connected car sharing is convenient but may involve the automaker as a third party in your data.
Can Usage-Based Insurance Raise Your Rates?
This is the most important question to ask before enrolling. The answer depends on the program and the state.
- Some programs only offer discounts and will not raise your rate based on the driving data.
- Others can raise rates for risky driving. Progressive, for example, states in its Snapshot terms that rates can increase based on driving in most states.
- Pay-per-mile costs rise when you drive more miles, by design.
State rules also matter. California’s insurance regulations, which stem from Proposition 103, limit how insurers can use telematics. Insurers there can use verified mileage for rating, but not other driving behavior data such as braking or time of day. Other states have their own rules, and your state insurance department can tell you what applies.
Before you enroll, ask the insurer directly: “Can my rate go up because of this program, and if so, by how much?” Get the answer in writing if you can.
Who Is Most Likely to Save
Usage-based programs tend to work in favor of drivers who:
- Drive fewer miles than average.
- Drive mostly during the day and avoid late-night trips.
- Brake and accelerate smoothly and keep a safe following distance.
- Do not touch their phone while driving.
- Drive in less congested areas with fewer sudden stops.
They tend to work less well for drivers with long commutes in heavy traffic, frequent night shifts or a lot of highway miles, even if those drivers are careful. Stop-and-go traffic can trigger hard-braking events that are not really a sign of risky driving.
Usage-Based Insurance for Teen and New Drivers
Some families enroll teen drivers in telematics programs, both for possible savings and for feedback on driving habits. Many apps show trip-by-trip scores, which can help new drivers spot habits like hard braking or phone use. Keep in mind that young drivers often score lower at first, and if the program can raise rates, that is a real risk. Our guide to insurance for learner drivers covers other ways to manage costs for new drivers.
How UBI Fits With Other Pricing Factors
Usage-based data does not replace the standard rating factors. Your insurer still looks at your age, location, vehicle, coverage choices, deductible, driving record and, in most states, credit-based insurance score. The driving data adjusts the price within that framework. Our explainer on what factors determine your insurance premium walks through the full list.
You can also combine UBI with other savings levers. Raising your deductible lowers the premium, as explained in deductible vs. premium, and a clean record over time can lower your rates, as covered in how much car insurance goes down after a year without claims.
Privacy: What You Are Agreeing To
Driving data is detailed. It can reveal where you go, when you leave home, how often you visit certain places and how you drive. Before you enroll, read the program’s privacy terms and look for answers to these questions:
- What exactly does the program collect, and does it include precise location?
- How long is the data kept after the program ends?
- Is the data shared with or sold to third parties, such as data brokers or affiliates?
- Can the data be used for claims decisions, not just pricing?
- Can you see your own data and correct mistakes?
- How do you stop participating, and what happens to the discount?
Regulators have paid more attention to connected-car data in recent years. In January 2025, the Federal Trade Commission announced a proposed order against General Motors and OnStar over allegations that they collected and sold drivers’ location and driving behavior data to consumer reporting agencies without clear consent. Also in January 2025, the Texas Attorney General sued Allstate and its data analytics subsidiary Arity over the collection of driving data through apps. These cases are a reminder to check what you have opted into, both with your insurer and with your car’s manufacturer.
Check Your Car’s Data Settings
Even if you never sign up for an insurance telematics program, your connected car may share driving data under the automaker’s settings. Review the privacy settings in your vehicle’s app or account and turn off any sharing you did not intend. You can also request your consumer file from LexisNexis Risk Solutions and Verisk, two companies that maintain insurance-related consumer reports, to see what driving data, if any, is on file about you.
How to Decide if Usage-Based Insurance Is Right for You
Use these steps:
- Estimate your annual mileage using past service records or your odometer.
- Be honest about your driving habits, including night driving and phone use.
- Get quotes with and without the program from at least three insurers.
- Ask whether rates can rise, and how long the monitoring period lasts.
- Read the privacy terms and decide whether the possible savings are worth the data you share.
- Try it for one term if the program is discount-only, then decide whether to keep it.
Our auto insurance premium calculator can help you compare quotes once you have them.
Tips to Score Well in a Telematics Program
If you decide to enroll in a behavior-based program, a few habits can help your score and, more importantly, make your driving safer:
- Leave more following distance, so you can slow down gradually instead of braking hard.
- Accelerate smoothly from stops and when merging.
- Put your phone away or use a do-not-disturb-while-driving setting before you start the car.
- Combine errands into fewer trips to cut mileage.
- Avoid late-night trips when you have a choice.
- Mark passenger trips in the app if it lets you, so rides in someone else’s car do not count against you.
These are the same habits that driving safety groups recommend anyway, so the benefits go beyond the discount.
Pros and Cons at a Glance
| Pros | Cons |
|---|---|
| Possible savings for careful, low-mileage drivers | Possible rate increases with some programs |
| Pricing based on your own driving | Detailed data collection, including location |
| Feedback that can improve driving habits | App errors can count passenger trips |
| Pay-per-mile fits remote workers and retirees | Long commutes and night shifts can hurt scores |
| Often easy to try for one policy term | Rules and availability vary by state |
Frequently Asked Questions
What is usage-based car insurance?
It is car insurance priced partly on data about your actual driving, such as mileage, braking, speed and time of day, collected through an app, a plug-in device or your car’s connected system.
Does usage-based insurance always save money?
No. Careful, low-mileage drivers often save, but some programs can raise rates for risky driving, and pay-per-mile costs rise when you drive more.
Is pay-per-mile insurance worth it?
It is often worth comparing if you drive well below average mileage, such as when you work from home or rarely use a second car. High-mileage drivers usually do better with standard pricing.
Can I quit a telematics program?
Usually yes, but you may lose any discount, and the insurer may keep data already collected according to its privacy policy. Check the terms before you enroll.
Does a usage-based program affect my claims?
It depends on the insurer’s terms. Some programs state that driving data may be used in claims handling, so read the privacy policy carefully.
The Bottom Line
Usage-based car insurance can reward careful, low-mileage drivers with lower premiums, and pay-per-mile plans can be a strong fit for people who rarely drive. The tradeoffs are data collection and, in some programs and states, the possibility of a higher rate. Compare quotes with and without the program, ask whether rates can rise and read the privacy terms before you enroll.
