Newer option for drivers may lower insurance costs

KSNF/KODE — If car insurance premiums are becoming less budget-friendly these days, there's one insurance option you might consider that will save you some of that hard-earned cash. However, there are a couple prerequisites you'll need to meet in order for you to qualify: Be a good driver and limit the amount of driving you do. If you happen to meet those qualifications, "Usage-Based Insurance" might be a good way to save money on auto insurance.

Usage-Based Insurance, or UBI, is an option offered by some auto insurance companies that tracks your driving and could result in cheaper car insurance. UBI programs generally measure speeding, acceleration and harsh braking, along with mileage and the time of day you drive. You get a driving score and often tips for improving your score. The better you drive, the better your auto insurance rates.

Inflation is one reason why drivers may be interested in usage-based insurance, as it can potentially reduce your car insurance bill. More drivers are being offered a usage-based or telematics option for their car insurance policies. A TransUnion survey in February and March 2022 found that 40% of respondents were offered a telematics program, which was up from 32% in November 2021. The percent of those who were offered a telematics program and opted in also rose from 49% to 65%.

How Usage-Based Insurance Works

Usage-based insurance programs collect vehicle "telematics" data that comes from cellular, GPS or other technology. These programs track certain driving behaviors such as:

* Speed

* Acceleration

* Hard Breaking

* Hard Cornering

* Miles Driven

* Time of Day

* Phone Use While Driving

The technology used to track your car's telematics data depends on your car insurance company. According to Insurify, driving data is collected in these ways:

* Through systems built into your car, such as BMW ConnectedDrive or OnStar

* Through a device plugged into your car's on-board diagnostics (OBD-II) port, such as Nationwide SmartRide

* Through a smartphone app, such as Allstate Drivewise or Farmers Signal

* Through a device called a "tag" that is installed on your windshield or rear window and pairs with your smartphone via Bluetooth, such as Liberty Mutual Insurance RightTrack

Some insurance companies will offer you a choice of how you want the data collected, depending on where you live. For example, Liberty Mutual Insurance RightTrack offers you the choice of a tag, plug-in or mobile phone, while State Farm Drive Safe & Safe lets you choose between a smartphone app or your car's OnStar system.

How your driving habits affect your car insurance premium will depend on your insurer, but in a typical UBI plan, your driving habits are tracked over a certain period of time. After you complete the initial review period, you may be offered a discount based on the telematics data.

The bottom line with UBI: The better the driver, the better the discount. Drivers usually save 10% to 15% annually with usage-based insurance. Many large auto insurance companies offer usage-based insurance, but it may not be available in every state. Before you sign up, make sure you understand the program's rules. You'll want to know exactly what driving behaviors are being measured and how your driving might impact your car insurance rates.

You can find more information on usage-based insurance, including the companies that offer it, HERE.