The world of insurance has dramatically evolved over the last few years. Companies once offered basic plans for a standard rate. Now, they offer a host of customizable options at different prices and programs that give you the chance to save money. For example, some insurance companies now offer mobile apps or devices that plug into your vehicle and monitor your driving habits. If you prove to be a safe driver, you can save on your monthly costs. This new type of insurance could be transformative to those who own and operate small fleets.
Recently, many providers have introduced a new category of insurance called “usage-based insurance,” or UBI for short. Like the previously mentioned program, usage-based insurance uses different mediums to track drivers’ habits. However, UBI generally focuses on the number of miles one has driven or the usage of the covered vehicle and bills accordingly, hence the name usage-based. This type of plan makes it possible for owner-operators to save significantly on liability insurance and only pay monthly instead of in full.
Let’s discuss usage-based insurance in a little more detail to determine if it’s right for you.
What is usage-based insurance?
In today’s world, there has never been a higher demand for the work of a truck driver. However, like many industries, there are moments of delay or total standstill. It’s for these reasons that those who own and operate the world’s fleets need coverage that offers flexibility.
Usage-based insurance is innovative and customer-centric, offering flexibility and a way for owner-operators to get precisely what they need from their coverage—nothing more, nothing less. Unlike most insurance plans requiring upfront payment and charge fees for excess cargo, UBI allows fleet owners to increase their operational efficiency, minimize their monthly spending, and mitigate load and risks by only paying for coverage when needed.
What are the advantages of UBI?
Advantages of usage-based insurance include:
- You get great discounts and savings. Most insurance companies who offer UBI also offer a 10-25% premium discount for responsible driving. Plus, you may continue to receive this discount every year if you continue to qualify.
- Employees can be tracked. Typically, with usage-based insurance, the covered vehicle and driver will receive a physical device or mobile app that provides geofencing and alerts you if the vehicle has gone outside of the predefined limits or even exceeds the speed limit.
- Drivers will gain better driving habits. As previously mentioned, most UBI coverage includes a telematics device that allows you to monitor your drivers. So, if they brake too hard, drive above the speed limit, or use evasive maneuvers, you’ll know. This “eye on the inside” will allow you to address these unsafe driving habits and save money as they improve.
- Accident investigations are easily handled. If the insured vehicle is involved in a collision, it’s easier for the authorities and claim investigators to pinpoint the cause of the accident, leading to a more accurate claim.
What are the disadvantages of usage-based insurance?
- It doesn’t recognize defensive driving. As mentioned above, telematics devices can monitor one’s driving habits and report them back to the insurance company. However, there are many instances where drivers must use defensive driving skills to avoid an accident. In many cases, these monitors cannot know the difference between reckless driving and protective measures.
- Privacy risks included. The trackers used with usage-based insurance store a ton of data, including driving information, location, and more. This data is then linked to your name and stored in a database. How this information can be used past the insurance company is vague, especially since they must always be on, or you risk losing your savings.
- It can be somewhat of a hassle. For companies with a more extensive fleet, the installation process and overall learning curve require a large amount of effort that may or may not be worth the savings.
Is usage-based insurance the right choice?
There are a few things that can help determine if usage-based insurance is right for you and your fleet.
Usage-based insurance may be right for you if:
- You travel less than 11,500 miles per year.
- You are a safe and responsible driver.
- You don’t mind being monitored by your insurance provider.
If you answered ‘yes’ to these three things, then you may want to look into a usage-based insurance plan.