Insurance Terms Defined – Usage Based (UBI)
The insurance industry is chock-full of terminology and terms that might be a little confusing to those not versed in insurance lingo. For this reason we have been creating posts defining common terms, as well as have a full glossary of insurance jargon on our website.
In this post we’re going to look at usage-based insurance or UBI as it is often referred to.
It is currently most commonly used in reference to car insurance. Usage based insurance or UBI in terms of your vehicle refers to coverage that bases its rates on how you actually use your car – how much you drive, how you drive and when you drive.
Car insurance providers use something called telematics or Plug and Save to glean this data about driving habits. The device is installed in a vehicle and gathers up the information that the insurer will then use to set rates. Or a mobile application is used to pass on this information.
If you’re a good driver, this can be a great way to save and get rewarded for your good driving habits. In fact, some insurance providers will even provide a discount to drivers just for having the device installed in their cars and getting on board the program (learn more here). And as of November 2020, insurers in Ontario are now allowed to penalize drivers for poor driving behaviour with higher rates and surcharges. Click here to learn more.
Another type of usage-based car insurance that rolled out in Ontario in 2018 is Pay as you Go insurance, which is slightly different from telematics. This type of UBI focuses on how much a car is driven, with the savings benefitting drivers who don’t use their cars that often. Learn more here.
While we’re mostly familiar with UBI and its application for car insurance, in the future we could certainly see this type of insurance rate setting expand, such as in home insurance, thanks to the advent of smart home technology, as we discussed over here.
From the Insurance Buddy blog:
Usage-Based Automobile Insurance Pricing in Ontario – Financial Services Commission of Ontario
What is usage-based insurance? – Insurance Business Canada
If you have any questions about how UBI can help you get cheap car insurance, please feel free to reach out to one of our insurance specialists. Or head over here to get a car insurance quote online 24/7.
We have provided the definitions in this blog post for general information purposes only. They are not meant to be complete descriptions to cover any and all terms, conditions and exclusions that are found in different insurance policies. If there is any inconsistency between this information and the definitions in your policy, it is your policy that governs. Contact your insurance broker if you have any questions or need any clarification about your particular policy and the definitions therein.
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