If you’re looking for a type of car insurance that better reflects your daily safe driving skills, usage-based insurance (UBI) might be a good fit for you. UBI is an option offered by some auto insurance companies that could result in lower car insurance rates.

These 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 rates.

How Does Usage-Based Insurance Work? (Plug in device or Cell phone App)

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 braking
• 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. Generally, 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 among 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 rates 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.

For example, Travelers IntelliDrive is a 90-day program. After successfully completing the program, you could earn up to a 20% discount when you renew your policy.

Traditional auto insurance pricing factors are also still generally built into your rate, such as your driving record, credit, vehicle type and location.

Is Usage-Based Insurance Worth It?

Usage-based insurance might be worth it if you are a safe driver. And some insurance companies will give you an automatic discount simply for participating in the program. For example, Nationwide SmartRide gives you a 10% discount when you sign up...and then can increase up to 40% based on your results.

But here’s where you really need to pay attention to the fine print. Some car insurance companies might raise your car insurance premiums if you don’t score well during the review phase of your UBI program.

For example, with Travelers IntelliDrive, risky driving habits like speeding and phone use could result in a higher premium than a traditional policy (although some states don’t allow this). If you’re the type of driver with a lead foot, it’s a good idea to get your bad driving habits under control before participating in a UBI program.

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