Usage-based and pay-per-mile car insurance: how telematics works

Usage-based insurance (UBI) prices your car insurance on data about how much and how you actually drive, collected through a phone app, a plug-in device or your car's built-in connected system. Pay-per-mile is one version that charges mostly by the miles you drive. It can save low-mileage and careful drivers money, but in some programs your rate can go up, and you're sharing detailed driving data.

By the Fast Insurance Group editorial teamPublished by Marcus L. Barber, former licensed Maryland property and casualty producer (2010–2012)Reviewed by Marcus L. Barber on October 17, 2026Updated October 17, 2026

This guide is general education, not advice for your situation. We're an independent publisher, not an insurer or agent, and we may earn a commission from partner links. How we make money.

What usage-based insurance is

The National Association of Insurance Commissioners (NAIC) describes usage-based insurance as a type of auto insurance that tracks mileage and driving behaviors. Traditional pricing relies on proxies like your age, ZIP code and claims history; UBI adds data about how you actually drive. The data comes from one of three places:

• A phone app that uses your phone's sensors and GPS.
• A plug-in device that connects to your car's diagnostic (OBD-II) port.
• Your car's built-in connected system, shared with the insurer with your permission.

Pay-per-mile vs. pay-how-you-drive

The NAIC names several program types. They generally work like this:

Pay-per-mile plans typically combine a fixed monthly charge with a charge for each mile driven, though each insurer designs its own. Compare the total you'd pay for your real annual mileage, not just the per-mile price.

What gets tracked

Depending on the program, the NAIC says data can include:

• Miles driven
• Time of day you drive
• GPS location
• Rapid acceleration, hard braking and hard cornering
• Speed
• Airbag deployment

Some app-based programs may also look at phone handling while driving. Ask each insurer for its exact list.

Who saves, and who might pay more

Usage-based programs reward low mileage and low-risk habits. Under the NAIC's description, someone who drives long distances at high speeds may be charged more than someone who drives fewer miles more carefully.

Not every program is discount-only. The Maryland Insurance Administration notes that premiums may actually increase at renewal as a result of the data collected. Before you enroll, get a clear answer on whether your price can go up, and whether you can leave the program and return to standard pricing. The NAIC's consumer guide has estimated that about 6% of Americans use it, though that figure isn't dated and adoption is growing.

Privacy and your driving data

Driving data can travel further than you expect. In January 2026, the Federal Trade Commission finalized an order against General Motors and OnStar over allegations that they collected and sold drivers' location and driving data without informed consent. The order bars GM for five years from sharing that data with consumer reporting agencies, and requires consent, data copies and deletion options.

The Consumer Financial Protection Bureau lists LexisNexis as a consumer reporting company that may share driving behavior data with auto insurers. You can request your LexisNexis report, which also includes your CLUE claims history, and dispute errors. The NAIC adds that some states require insurers to disclose their tracking and limit the data they collect.

Questions to ask before you enroll

1. Can my rate go up based on my driving, or is it discount-only?
2. What data do you collect, including location and phone use?
3. How long do you keep it, and do you share or sell it?
4. How is a trip scored, and can I see my scores?
5. What happens if someone else drives my car, or I'm a passenger with the app on?
6. Can I leave the program, and what happens to my price if I do?

Then compare the result with ordinary quotes. Our guide on lowering your car insurance lists other discounts to ask about.