What is Usage-Based Insurance (UBI)?
UBI is a new type of car insurance in which you pay premiums based on how much and how safely you drive. Unlike traditional insurance (where everyone pays a fixed amount), UBI rewards low-mileage and safe drivers with lower costs.
Why is UBI Becoming Popular?
- Work-from-home trends mean many cars are used less.
- AI & machine learning help insurers track driving habits and adjust prices fairly.
- More choices for customers (pay per km, pay per trip, or pay based on driving safety).
How Does UBI Work?
1. Pay-As-You-Drive (PAYD)
- Pay only for the kilometres you drive.
- Example: If you drive 5,000 km/year, you pay much less than someone driving 20,000 km/year.
2. Pay-How-You-Drive (PHYD)
- Safe drivers pay less.
- A telematics device (or mobile app) tracks:
- – Speed
- – Braking habits
- – Night driving
For example, If you avoid sudden brakes and follow speed limits, your premium could drop by 10-20%.
3. Pay-As-You-Go (PAYG)
- Buy insurance in small packs (e.g., 1,000 km at a time).
- Example: If you only drive on weekends, buy limited km coverage and top up when needed.
Who Should Get UBI?
- Low-mileage drivers (e.g., less than 10,000 km/year).
- Multiple-car owners (if one car is rarely used).
- Safe drivers (no speeding, harsh braking).
Example Savings:
- Traditional premium: ₹15,000/year
- UBI premium (if you drive 6,000 km/year): ₹8,000/year (almost 50% cheaper!)
3 Ways to Save More with UBI
1. Drive Less = Pay Less
– If you work from home, declare lower mileage.
2. Drive Safely = Get Discounts
– Smooth driving → Lower renewal premiums.
3. No Claims = Extra Bonus
– Just like regular insurance, a No-Claim Bonus (NCB) applies.
⚠ Important Note:
- If you exceed your declared km limit, your insurance may temporarily expire.
- You can increase the limit mid-term by paying a small extra premium.
Is UBI Right for You?
✅ Yes, if you drive less than average or are a safe driver.
❌ No, if you drive long distances daily or aggressively.
Next Steps:
- Check if your insurer offers UBI (many like ICICI Lombard and Bajaj Allianz do).
- Install their telematics app to start tracking your driving.
- Compare quotes between traditional vs. UBI policies.
Bottom Line:
UBI makes car insurance fairer and cheaper for those who drive less. If your car mostly sits in the garage, this could be your big ticket to savings!
