Usage-based insurance to determine the cost of your auto insurance

Some insurers offer usage-based insurance, which relies on technology to record information about your driving behaviour. Your insurer then uses this information to calculate your insurance premiumAn insurance premium, or premium, is an amount that a person or company must pay on a regular basis to keep their insurance in effect. For example, if Mary has to pay $200 per year to keep her life insurance in effect, then the premium is $200.

The insurance premium should not be confused with the face amount, or insured amount, which is the amount that the insurance company has to pay out. In the same example, if Mary has life insurance that pays $100,000 to Peter upon her death, then the face amount is $100,000. 
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Depending on the results, you might get a discount, or the cost of your automobile insurance might go up!

How does usage-based insurance work?

You install an electronic device in your vehicle or download an app to your smart phone which send information to your insurer about:

  • Maximum speed;
  • Sudden braking or acceleration;
  • Etc.

Potential savings

Many insurers let you consult the information about your driving. You’ll see the result on your insurance invoice. The savings can be significant or minimal.

Some insurers will offer to review your premium each month.

What you should do

Before signing up for a usage-based insurance program, find out:

  • What kind of information your insurer will receive (distance travelled, hard braking, number of trips, destinations, etc.);
  • Who can consult this information;
  • How often your insurance premium is calculated (e.g., each month, every six months);
  • Discounts the insurer might offer you;
  • Increases the insurer may charge.

Also look into:

  • How the insurer protects your personal information;
  • How you can withdraw from the program.
Warning

Ask the right questions

Your insurer must agree not to use your data to:

  • Refuse an accident claim;
  • Decide to no longer insure you.

Before you sign up for a usage-based insurance program, read the conditions carefully.

End of the warning

More than one driver?

If another person uses your vehicle, how he or she drives could affect the cost of your insurance.

Warning

Information stolen?

No technology is absolutely fraud-proof. There’s always a chance that the information about your driving habits could be stolen.

End of the warning

Before you decide

Make sure you understand how usage-based insurance programs work and how they affect you. You should also work out the potential savings before making a decision.