Glossary

Usage-based insurance

Car insurance priced partly on how and how much you actually drive, measured by an app, plug-in device or the car's connected services.

Also called: UBI, pay-how-you-drive, pay-as-you-drive, PHYD, PAYD

Usage-based insurance (UBI) bases part of your price on actual driving data rather than only on traditional rating factors such as age, location and driving record. The data comes from telematics: a smartphone app, a plug-in device or the car's built-in connected services.

There are two main types. Behavior-based programs, sometimes called pay-how-you-drive, score braking, acceleration, speed, time of day, mileage and, with phone apps, phone use while driving, then apply a discount or, in some programs, an increase at renewal. Mileage-based programs, or pay-per-mile insurance, charge a base rate plus a per-mile rate. Each insurer sets its own discount range; State Farm advertises up to 30% for Drive Safe & Save and Nationwide up to 40% for SmartRide (as of October 2026). Example: a $1,400 annual premium with a 15% earned discount drops to $1,190 (hypothetical figures).

UBI tends to suit low-mileage drivers, people who rarely drive late at night, and those willing to change their habits. It is less attractive if you drive long distances, brake hard often in city traffic, or are uncomfortable sharing data. Ask whether the program can raise your rate, how long monitoring lasts, and how your data is used and shared. See usage-based car insurance explained.

Last reviewed October 4, 2026

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Related terms

Telematics Technology that records how, when and how much a car is driven, through an app, plug-in device or the car itself, so insurers can price on behavior. Pay-per-mile insurance A policy priced as a monthly base rate plus a few cents for each mile driven, tracked by an app, plug-in device or the car itself. Annual mileage How many miles a car is driven in a year, a rating factor because more time on the road means more chances of a claim. Rating factors The characteristics insurers use to price a policy, such as driving record, location, vehicle, mileage and, where allowed, age and credit. Safe driver discount A lower rate for drivers with no recent at-fault accidents, major violations or claims, usually measured over three to five years.

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Related insurers

Farm Bureau Financial Services Iowa-based Farm Bureau brand writing auto, home and farm coverage in eight Midwest and Western states through exclusive agents, with Driveology telematics. Lemonade A New York app-based insurer selling car insurance priced partly on mileage and phone telematics in 12 states; owner of pay-per-mile pioneer Metromile. Metromile The San Francisco pay-per-mile car insurer Lemonade bought in 2022; its brand is being retired, and Metromile Insurance Company now issues Lemonade policies. National General Allstate's independent-agent brand, the former GMAC Insurance, writing nonstandard and standard auto; Allstate bought it for $4 billion in 2021. Palisades (Plymouth Rock Assurance in New Jersey) New Jersey reciprocal insurance group, managed by Plymouth Rock, that underwrites Plymouth Rock Assurance auto policies in NJ, PA, NY and CT. Root Insurance A Columbus, Ohio, app-based insurer that prices car insurance largely on a smartphone test drive, sold direct, through partners and agents in 37 states.

Related tools

Pay-per-mile break-even calculator Find the monthly mileage at which a pay-per-mile policy costs the same as a traditional one, using the base rate and per-mile rate from real quotes.