Usage-Based Insurance In Canada

Usage-Based Insurance In Canada

Written by Priyanka Correia
Fact-checked by Caitlin Wood
Last Updated June 24, 2021

There’s no getting around a car insurance policy if you want to legally operate a vehicle on Canadian roadways. And those car insurance premiums can definitely put a dent in your budget. 

Luckily, there are a few ways to save money on your car insurance premiums, and usage-based insurance (UBI) may be one of them. With this type of auto insurance, your premiums are calculated based on the type of driver you are and how far you take your car when out on the road. 

Let’s take a closer look at usage-based insurance to help you decide if this is something that can potentially help you keep your premiums low.

What Is Usage-Based Insurance (UBI)?

Usage-based insurance offers a way for drivers to save money on their car insurance policies. Your premiums will be based on your driving habits (pay-as-you-drive) or how far you drive (pay-as-you-go). That way, if you don’t put many kilometres on your vehicle or are a safe driver, you may be rewarded with savings on insurance premiums. 

This type of insurance uses a specialized technology called ‘telematics’ that involves a computer chip inserted into the computer system of your vehicle. This will keep tabs on your driving and will help determine your premiums. Some insurance providers are also using an app integrated with smartphone technology to measure drivers and the distance they drive. 

Looking for even more savings? Consider bundling your home and auto insurance.

Two Types Of Usage-Based Insurance

We briefly touched upon “pay-as-you-go” and “pay-as-you-drive,” but what exactly are they?

  • Pay-as-you-go. This insurance keeps tabs on how far you drive. So, the more kilometres you put on your car, the higher your insurance premiums will be, and vice versa.
  • Pay-as-you-drive. This insurance tracks your driving behaviour, such as how fast you’re going, where you’re driving, and how smoothly you speed up or slow down. The better your driving habits, the lower your premiums will be. 

Both of these insurance types require the use of telematics on an integrated app on your smart device to track your driving habits or distance driven. 

Benefits Of Usage-Based Insurance

Usage-based insurance may be worth considering for a variety of reasons, including the following:

  • Save with good driving behaviour. You will be rewarded with lower insurance premiums if you keep your mileage to a minimum and maintain good driving habits. 
  • Easy to set up. Many insurers simply require an app to be downloaded on your smartphone. This technology will then be used to track your driving behaviour. 
  • You’re in control of your rates. Since your insurance premiums are based on how you drive and the distance you travel, you are in control of how much you pay for car insurance. 

Drawbacks Of Usage-Based Insurance

While you can potentially save money with usage-based insurance, there are some drawbacks to consider:

  • Lack of privacy. It’s possible that the data collected from this technology may be given to third-parties or used to deny claims. While insurance companies claim that they protect all information collected, you may still want to verify that your consent is required before they share your data with any third-party.
  • It can backfire on you. If you lend out your car once in a while to another driver, your premiums may be affected if they drive recklessly. 

Usage-Based Insurance FAQs

Is UBI available in all provinces?

No. Usage-based insurance is only available in certain provinces, including Ontario, Quebec, Alberta, New Brunswick, and Nova Scotia. 

How much money can I save with usage-based insurance?

That depends on how little you drive and how good your driving behaviour is, as well as your insurance provider and the details of the plan. That said, drivers can save as much as 25%.

Can insurers use the collected driving data to increase my insurance?

That depends on where you live. For instance, in Ontario, usage-based insurance companies are not allowed to use the information collected to increase your rates, cancel your policy, or come up with excuses to deny a claim you file. They are only permitted to use the data to establish your driving profile and help you lower your insurance premiums. 

Is my usage-based insurance data used the same way by all insurers? 

No. Every insurance provider uses the information differently to calculate premiums. For instance, some insurers may assign greater weight on speed than other factors, while others place more emphasis on how far you drive. 

Do all car insurance companies offer usage-based insurance?

No, but many do, including the following:
  • Allstate 
  • Belairdirect 
  • CAA 
  • The Co-operators 
  • Desjardins 
  • Onlia 
  • TD 

Final Thoughts

If you’re a safe driver who doesn’t put much mileage on your car, then a usage-based insurance policy may be something worth considering. This technology is becoming increasingly popular and may be a more affordable option than a traditional car insurance policy for certain types of drivers. Just make sure you take the time to do some comparison shopping among different insurers to find the best price possible. 

Rating of 5/5 based on 1 vote.

Priyanka is a personal finance expert at Loans Canada. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives. She has taken financial control of her life by using Mint to budget and track her expenses while growing her wealth by investing through Wealthsimple. She also believes in having an emergency fund, so she keeps a good sum of money in an easily accessible high-interest savings account. She also uses the American Express Cobalt Card to earn points on all her purchases, further fueling her savings goal. She also uses Loans Canada’s lender directory whenever she wants to compare rates from different lenders.

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