What is usage-based insurance?


Usage-based insurance calculates your premiums based on how you actually drive, instead of how your insurer thinks you'll drive based on things like your age and your car. If you drive safely or infrequently you could get discounts or cheaper premiums.

Zack SigelKara McGinley


Zack Sigel

Zack Sigel

Managing Editor

Zack Sigel is a former managing editor at Policygenius who oversaw our mortgages, taxes, loans, banking, and investing verticals.

 & Kara McGinley

Kara McGinley

Editor & Licensed Home Insurance Expert

Kara McGinley is an editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

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Key Takeaways

  • Usage-based car insurance is a type of car insurance that calculates your premium based on your actual usage of your car

  • There are two types of usage-based car insurance policies: pay-how-you-drive and pay-per-mile

  • Insurance companies can determine how frequently or safely you drive through a mobile app or plug-in device that tracks your car. The less you drive (or the more safely you drive) the cheaper your premiums will be

  • Some insurance companies only offer usage-based car insurance policies, while other major insurance companies offer it as a discount off your existing policy

Car insurance protects you from having to pay out of pocket for damages or injuries you cause with your car. It can also pay to repair or replace your car when it’s damaged or lost due to a peril covered by your policy, like fire or hail damage.

Your premiums – the amount you pay to keep your policy active – are partly determined by the amount of risk you pose. If you’re a good driver or you don’t drive often, your auto insurance company may lower your premiums or offer you a safe driver discount.

Traditionally, car insurance underwriters have used statistics to determine risk based on how people with your characteristics and driving habits are likely to drive. Insurance companies will base your car insurance rates on things like your age, credit score, driving history, the type of vehicle you drive, and more.

However, some car insurers offer policies or discount programs that base your premiums on how you actually drive. This is called usage-based insurance. Under usage-based insurance, the more safely you drive, the lower your premiums will be. Naturally, the riskier a driver you are, the higher your premiums will be. Usage-based insurance can save you money over traditional methods of calculating premiums if you, on average, are a better or less-frequent driver than your demographic of peers.

In this article:

How does usage-based insurance work?

Usage-based car insurance is car insurance that calculates your premium based on your actual usage of your car. The theory behind it is that if you’re not driving, you’re not likely to get involved in an accident.

Not every insurance company currently offers usage-based car insurance and some may only offer it as a discount program. UBI has also been slow to catch on with consumers because of the privacy issues inherent with letting an insurance company track your driving.

There are two types of usage-based insurance policies

  • Pay-per-mile or pay-as-you-drive: These rates are based solely on the number of miles you drive during the policy period. If you don’t drive often, your rates will be lower.

  • Pay-how-you-drive or behavior-based: These rates factor in how safe of a driver you are. If you drive safely, your rates will be lower than if you drive in a high-risk fashion.

To monitor your driving behavior, auto insurance companies may ask you to report the information every policy period, often through a mobile app or device that tracks your driving behavior. When you renew your policy for another period, your insurance company will use the information you reported to adjust your rate. If your insurer determines that you’ve become a better or less-frequent driver since the last time you renewed your policy, you may be able to save hundreds of dollars.

Whether you want to purchase a usage-based car insurance policy or a traditional policy entirely depends on your needs.

How do I report my driving?

You may have a couple of options to report your driving to the insurer. Insurance companies vary on what types of reporting options you have.

Mobile app

Your insurance company may offer a mobile app for your smartphone that functions as a GPS to record how much you drive. Within the app, you’ll be able to see your most recent trips, how much you drove during them, and what time you were driving. Driving less or at less risky times (that is, avoid late nights on weekends, for example) can result in a lower premium.

You may also be able to see certain risky actions you took, such as using your phone, driving too fast, accelerating too quickly, or braking too hard. If you record too many of these, your insurance premiums will likely go up.

The app may run in the background and only activate when it detects that you’re moving at a certain speed.

Plug-in device

Your insurance provider might provide you with a dongle or other connecting device that plugs into your car’s OBD port. (That’s the on-board diagnostics.) As with the mobile app, the plug-in device also features a GPS system, and records all your driving trips as well as any unsafe maneuvers you made while driving.

You’ll be able to see logs of all your driving habits by logging onto your insurance carrier’s website.

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Which car insurance companies offer usage-based insurance?

Certain insurance companies only offer usage-based insurance policies, and they do not offer what would be considered a standard car insurance policy,, in which your rates are based on other factors besides your driving. Note that these insurers that do offer usage-based insurance may only do so in some states.

Root insurance

Root only offers usage-based insurance. When you sign up for Root, you complete a “test drive” period using the app and then Root sets your insurance rates based on your driving behavior.

Root also differs operationally from traditional insurance companies. Everything from applying to filing claims happens on the app, there are no agents, just a customer service team. The app will continuously track your driving behavior until your policy is up. When your six-month policy is up, it will be renewed, and your rates may change depending on how you drive during your policy period.

Root is available in Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, and Virginia.

Learn more about the pros and cons of Root Insurance.


Metromile is an insurance company that only offers usage-based insurance, as opposed to other insurers that also offer traditional car insurance. Metromile offers both pay-as-you-drive insurance, which tracks the miles you drive, and pay-how-you-drive insurance, which also tracks behavior.

However, the company only offers insurance in Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington.

Which car insurance companies offer usage-based insurance discounts?

On the other hand, many major car insurance companies offer usage-based insurance programs, which work as a discount to your auto insurance policy, although not all do. Drivers can sign up for these programs and then get a discount on premiums depending on how safely and how frequently, or infrequently, they drive.


Progressive’s program is called Snapshot and offers both an app and a plug-in device, as well as a 30-day trial period to make sure that pay-as-you-drive insurance is right for you.

In September 2018 Progressive announced a commercial usage-based insurance program called Smart Haul for truckers.


Esurance’s usage-based insurance is called DriveSense. Currently, DriveSense is only offered in 18 states. Both app-based and device-based monitoring are available.


Nationwide’s usage-based insurance option is called SmartRide. You’ll be sent a plug-in device and be able to track your progress. Additionally, you only have to run the device for a single policy period to lock in your car insurance discount. You have to already be a Nationwide customer, but using the OBD-II port device will never raise your rates, only lower them if you’re eligible.


Allstate’s usage-based insurance program is called Drivewise. You’ll log into your Allstate Drivewise app to track how often you drive and how safely you drive. Drivers get discounts for keeping speed below 80 mph, limiting late night trips, and limiting hard braking.


Safeco’s usage-based insurance is called RighTrack. Once you enroll in the program, you immediately receive an initial discount off your policy’s premium. They send you an easy to install plug-in that tracks your driving behavior.


Depending on what state you live in, you might be eligible for Travelers’ IntelliDrive usage-based insurance program. It’s a 90-day program that uses a mobile app to track your driving habits. If you drive safely, you could potentially receive a 20% discount, however if you have riskier driving habits this program could actually result in a higher premium.

State Farm

State Farm’s usage-based insurance program is called Drive Safe & Save. You can enroll by downloading their app or through OnStar. This program tracks driving habits like quick acceleration, speeding, and distracted driving. Safe drivers can earn up to 30% in savings.