Usage-based car insurance ties part of your premium to how, or how much, you actually drive, measured through a mobile app or a plug-in device. It can lower costs for low-mileage and consistently safe drivers, but it means sharing your driving data with the insurer.
How it's tracked
A smartphone app or a plug-in OBD-II device records mileage and driving behavior
Two main models
Pay-per-mile (priced by miles driven) and behavior-based safe-driver discounts
Who benefits most
Low-mileage drivers and consistently safe drivers
Core trade-off
Possible savings in exchange for sharing driving and location data
Usage-based insurance (UBI), also called telematics or pay-how-you-drive coverage, prices part of your auto premium on your actual driving rather than on traditional rating factors alone. Instead of relying only on your age, ZIP code, vehicle, and claims history, the insurer collects real driving data and factors it into your rate.
Enrollment is typically optional, and many programs begin with a participation or enrollment discount just for signing up. Your rate is then reviewed after a monitoring period, or adjusted on an ongoing basis, based on the data collected. Program design, available discounts, and the rules around them vary by carrier and by state.
Programs collect data one of a few ways: a mobile app that uses your phone's motion sensors and GPS, a small device that plugs into your car's OBD-II port, or, for some newer vehicles, data reported directly by the connected car. The app-based approach is the most common today.
The specific metrics differ by program, but telematics systems commonly measure the following behaviors, which are combined into a driving score or a per-mile rate:
Two distinct models fall under the usage-based umbrella. Pay-per-mile insurance charges a base rate plus a per-mile rate, so your premium scales up or down with how much you drive. It is generally aimed at low-mileage drivers, such as remote workers, retirees, or households with a lightly used second car.
Behavior-based programs keep your traditional policy structure but offer a safe-driver discount tied to how you drive rather than how far. Here the emphasis is on smooth, consistent driving, avoiding hard braking, speeding, and heavy late-night use. Some carriers, such as Nationwide, run both a behavior-based program and a separate pay-per-mile product, so it is worth confirming which model a given plan uses.
Most major US insurers now offer some form of usage-based option. Availability, exact terms, and whether the program is app-based or device-based vary by carrier and state. Widely recognized examples include:
Usage-based insurance requires sharing detailed data, which can include your location, the times you drive, and how you handle the vehicle. Before enrolling, read the program's privacy terms to understand what is collected, how long it is kept, whether it can be shared with third parties, and how it may be used beyond pricing your policy.
Discounts are not guaranteed. Many programs are discount-only, meaning the worst case is that you simply earn little or no discount. But with some carriers and in some states, data showing aggressive or high-risk driving, such as frequent hard braking, speeding, or heavy late-night driving, can raise your premium at renewal rather than lower it. Rules differ, and some states restrict or prohibit surcharges based on telematics data. Confirm how a specific program can affect your rate before you opt in.
The drivers most likely to come out ahead are those who drive relatively few miles and those who drive consistently safely. Low-mileage drivers tend to benefit from pay-per-mile pricing, while smooth, unhurried drivers tend to benefit from behavior-based discounts.
Usage-based insurance is a weaker fit for high-mileage drivers, for those whose driving data may flag as risky, and for anyone uncomfortable with ongoing monitoring. Because savings, monitoring periods, and surcharge rules vary widely, get a personalized quote and read the program terms. To confirm what a carrier is allowed to do in your state, contact the carrier directly and check with your state Department of Insurance (DOI).
It can, depending on the carrier and state. Many programs are discount-only, so the worst outcome is a small or no discount. But some carriers can increase your premium at renewal if the data shows risky driving, and some states restrict or prohibit that. Ask the carrier and check your state DOI before enrolling.
Many app-based and device-based programs use GPS to measure mileage, time of day, and sometimes speed relative to posted limits. The exact data collected varies by program. Read the privacy policy to see what is gathered, how long it is stored, and whether it is shared.
It depends on how much you drive. Pay-per-mile charges a base rate plus a per-mile rate, so low-mileage drivers often save, while high-mileage drivers may pay the same or more. Estimate your annual mileage and compare a quote against a standard policy.
It varies by program. Some monitor an initial period and then set a discount, while others track continuously and adjust over time. Check the program terms so you know whether monitoring is temporary or ongoing.
In behavior-based programs, hard braking, rapid acceleration, speeding, and heavy late-night driving can count against your driving score and reduce your discount. With some carriers they may also affect your rate at renewal, so review how your program scores these behaviors.
Savings depend on your driving, mileage, carrier, and state, so no single figure applies to everyone. Request a personalized quote, review the program's terms, and confirm with the carrier and your state Department of Insurance how the program can affect your premium.
Sarah Mitchell
Editorial Lead, Property & Casualty
This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.
Reviewed 2026-06-14
We monitor rate filings in all 50 states. Get notified when rates change in your area — and discover new ways to save.
Free forever. Unsubscribe with one click. No spam, ever.
Important Disclaimer
This site provides general educational information only and is not a substitute for professional insurance advice. All rates, data, and coverage details are estimates and may not reflect your actual premiums. Insurance availability and pricing vary by state, insurer, and individual risk factors. Always consult a licensed insurance professional in your state before making coverage decisions.