Usage-based Car Insurance (UBI): What Is It and How Does It Work?
What is usage-based car insurance?
Usage-based car insurance refers to auto insurance discount programs where a driver agrees to share driving data with their insurance company in exchange for potential discounts. By tracking your actual driving, usage-based insurance (UBI) can adjust your price to reflect your actual safety on the road.
Is usage-based insurance the same as telematics?
“Usage-based insurance” and “telematics” are often used interchangeably to refer to discounts based on driving data, but the terms have slightly different meanings:
- Usage-based insurance refers to the product or discount program offered by the insurer, which uses telematics technology to work
- Telematics is the technology that collects and transmits location and driving behaviour data from your vehicle or smartphone to your insurer
How does usage-based car insurance work?
Usage-based car insurance offers discounts on car insurance premiums in exchange for driving data shared with your insurance company. Insurers analyze driving data looking for markers of safe driving habits such as maintaining a safe speed and avoiding on-road distractions.
Most UBI programs follow the same basic format:
- Enrolment and setup: To enrol in a UBI program, you’ll sign an agreement that explains which telematics data your insurer can collect and authorizes them to access that data. You’ll then download a mobile app or receive a plug-in device that will collect and send the data to your insurer.
- The monitoring period: Once you’ve enrolled, you’ll drive for a certain period of time or number of trips in order to provide your insurer with enough data to adjust your rate. Program requirements vary, so check your agreement to understand how long your monitoring period lasts.
- Premium adjustment: Your premium will be adjusted at your policy’s first renewal date after the monitoring period is complete. Some insurance providers only offer discounts for safe driving; some may add a surcharge to your policy if your monitoring period detected unsafe driving.
Most insurers in Canada add an automatic enrollment discount (typically 10%) to your policy when you enrol in a UBI program. This is typically a one-time discount that will be removed after the monitoring period is up and replaced by any discount or surcharge you earned based on your driving behaviour.
What does usage-based insurance track?
Usage-based insurance tracks factors associated with a higher risk of car accidents, which may include:
- Vehicle speed: Insurers may track how consistently you stay within the speed limit or the number of kilometres you drive over a certain maximum speed threshold.
- Day and time: Nighttime driving, especially between the hours of midnight and 4 a.m., is considered extremely high-risk, while daytime driving is considered low-risk, especially on weekends.
- Acceleration: Smooth acceleration reduces the risk of accidents.
- Braking: Hard braking events (that is, a rapid drop in speed) are associated with poor driver attention or aggressive driving behaviour.
- Cornering: Navigating corners smoothly can reduce your risk of accidents.
- Trip duration/distance: Many insurers use trip duration as a metric for driver fatigue, since driving for multiple hours without a break can negatively impact attention and response times.
- Phone use: Interacting with a smartphone while driving is a major cause of distracted driving and can lead to accidents.
- Road type and condition: Many insurers analyze the type or condition of the roads you drive on (e.g., highway vs. residential streets, poorly-maintained vs. smooth and well-lit) to provide context for your overall driving risk.
- Overall mileage: A few insurers fold a mileage-based discount into their safe driver UBI program, rewarding low-mileage drivers with an added discount.
- Routines: One insurer, Desjardins, rewards routine driving along the same roads due to the lower risk associated with driving a route you know well.
Read the terms and conditions page for your insurer’s UBI program before enrolling. If you’re already enrolled, you can check the terms and conditions to verify which types of data your insurer collects through UBI.
Which insurance companies track the most data through UBI?
Aviva, belairdirect, Intact, Sonnet, and Wawanesa track more driving data through UBI than any other insurance company, with each program tracking eight individual driving factors.
By contrast, Allstate, CAA, and Pembridge track the smallest amount of driving data through their UBI programs, with just three factors tracked by each app.
What are the different types of usage-based car insurance?
Usage-based car insurance programs fall into two categories:
- Mileage-based insurance (pay-as-you-drive): Bases auto insurance premiums on the number of kilometres you drive
- Telematics insurance (pay-how-you-drive): Bases car insurance rates on a safety score calculated from driving behaviour data
Pay-as-you-drive or mileage-based insurance
Pay-as-you-drive insurance, also known as pay-as-you-go insurance, bases auto insurance premiums solely on your actual mileage. It’s designed for low-mileage drivers who log 12,000 kms per year or less.
CAA Insurance is the only major Canadian insurer currently offering a mileage-based UBI auto insurance program, CAA MyPace. MyPace allows users to pay a low base rate and purchase additional coverage in 1,000 km increments as needed.
Driving-behaviour or telematics programs
Safe driving telematics programs that reward discounts based on driving behaviour are the most common type of usage-based auto insurance in Canada. Most major insurers in Canada offer some type of telematics discount program, with the notable exceptions of The Cooperators and Economical Insurance.
The best usage-based car insurance discounts in Canada
No usage-based insurance program is the right fit for every driver in Canada. Start by comparing car insurance quotes and coverage from the best car insurance companies before factoring in the potential for a UBI discount.
If you’re interested in UBI for car insurance, we’ve identified programs with:
- The highest potential discounts
- The least risk of increased insurance costs due to unsafe driving habits
- The shortest monitoring periods
- Biggest available discount: Sonnet
- Best for drivers under 25: CAA
- Best for drivers without a smartphone: CAA
- Best for those who prefer to limit data sharing: Allstate or Pembridge
- Best for low-mileage drivers: CAA or Sonnet
Compare auto insurance quotes with and without a UBI discount. Read the terms and conditions of any UBI program in full before enrolling.
What are the pros and cons of usage-based car insurance?
Usage-based car insurance offers significant cost savings and may even improve your driving, but it often comes with additional financial risks as well as privacy concerns.
Can usage-based car insurance increase your premium?
Yes, usage-based car insurance programs can increase your premium if the program detects unsafe driving habits.
If your insurance company observes unsafe driving behaviours such as speeding, hard braking, or nighttime driving during your monitoring period, your driving score will reflect this unsafe activity. At least seven major Canadian insurers apply a surcharge, or an added premium, to drivers who receive a poor driving score through UBI.
If you receive a surcharge through a UBI program, you have two options:
- You can improve your driving habits (e.g., reduce phone use) and wait to receive an updated premium adjustment at your next policy renewal
- You can switch to a different car insurance provider for a cheaper rate
Is usage-based car insurance safe for your privacy?
Usage-based car insurance programs require customer consent to collect vehicle and personal data, but some insurers may have the right to share data with third parties.
In the U.S., insurers have faced legal controversies and government criticism for the alleged misuse of customer data obtained through UBI programs. While such lawsuits haven’t materialized in Canada as of 2026, thanks in part to the strong consumer protections offered by Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA), some experts say it’s “only a matter of time” until similar lawsuits crop up here.
It comes down to your personal level of comfort with the data your insurer collects and the uses they’re permitted to apply it to. Before enrolling in a UBI program, be sure to:
- Read the terms and conditions in full (yes, the whole thing!)
- Make sure you understand what data your insurer will have access to
- Check to see how your insurer can use the data and whether it can be shared with third parties
Who might benefit from usage-based car insurance?
You’re most likely to benefit from usage-based car insurance if you drive infrequently, only drive during the day, and take familiar routes on well-maintained roads with smooth traffic.
You may benefit from usage-based car insurance if:
- You are a remote or hybrid worker
- Your vehicle is in good condition
- Your regular commute covers safe, well-maintained roads with no sharp curves, traffic slowdowns, or other driving hazards
- You rarely or never drive at night
- You’re comfortable sharing driving information with your insurer
When usage-based insurance might not be worth it
Usage-based insurance might not be worth it if you need to drive at night regularly, you share your vehicle with multiple drivers, or you drive in an area with frequently changing traffic patterns.
Usage-based insurance apps may count the following as indicators of unsafe driving, even if you are handling your vehicle in a safe and responsible manner:
- Driving above the posted speed limit, even on highways
- Highway driving of any kind
- Nighttime driving, especially between 12 a.m. and 4 a.m.
- Braking to avoid an accident due to another driver’s inattention or erratic behaviour
- Driving on a roundabout
- Another person in the vehicle interacting with your phone
- Driving on poorly-maintained roads
- Driving for more than two hours without a break
Night shift workers, frequent highway drivers, and anyone who routinely drives long distances may not be a good fit for usage-based insurance.
How to compare usage based car insurance options
If you’re considering enrolling in usage based car insurance, compare program details when shopping for auto insurance quotes. Take into consideration:
- What data is collected: The more individual data points an insurer uses to calculate your driving score and discount, the higher the risk of a poor score.
- How long you’ll wait for a discount: A short monitoring period could get you a discount sooner and reduce the odds of an unsafe driving event during your monitoring period.
- Whether a surcharge is possible: Some UBI programs can add a surcharge to your policy for unsafe driving, while others can only lower your rate with no risk of an increase.
Is usage based car insurance worth it?
Usage based car insurance may be worth it if you’re a safe driver with a short, consistent daytime commute over well-maintained roads with minimal traffic.
Usage-based car insurance rewards safe driving, but it also rewards limited, predictable, and uneventful driving. If you drive frequently, over long distances, or in a dense, dynamic urban area, usage-based insurance might not be the right fit.
FAQ: Usage based car insurance
This article is for general information only and is not insurance or legal advice. Examples and any sample quotes or rate ranges are illustrative and do not constitute an offer or guarantee of coverage, price, or eligibility. Actual coverage, discounts, and premiums depend on your individual circumstances and the insurer provider; if there is any discrepancy, your policy and insurer documentation govern. For advice about your situation, speak with one of our licensed insurance professionals.