The Bankrate promise
At Bankrate, we strive to help you make smarter financial decisions. To help readers understand how insurance affects their finances, we have licensed insurance professionals on staff who have spent a combined 47 years in the auto, home and life insurance industries. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation of . Our content is backed by Coverage.com, LLC, a licensed entity (NPN: 19966249). For more information, please see our .
- Telematics programs record data from your car to determine your driving habits and can be used to provide discounts to drivers who avoid accidents and other dangerous situations.
- Telematics programs typically operate on an opt-in basis and offer insurance companies more insight into a driver's habits to better assess risk.
- Some worry that telematics programs create privacy concerns for drivers and could be used by insurance companies to raise rates for some drivers.
When shopping for car insurance, you might read about “good driver” discounts and other programs that reward you for being safe on the road. But how do insurance companies know if you are a safe driver? Increasingly, car insurance companies rely on telematics programs. These systems collect data based on real-time surveillance of your driving habits and can be used to improve your driving behind the wheel and potentially lower your monthly premium. In some cases, however, the reverse can be true, as some telematics programs might also increase your rate if your insurer observes unsafe driving habits. Bankrate’s insurance editorial team explains what telematics is and how it works so you can decide if it’s right for you.
What are telematics programs?
Insurance carriers may use telematics to create usage-based rates for premiums. With the data collected, a policy may be curated to fit the exact needs of the driver. Telematics may be used to customize a policy by adjusting rates based on factors like miles driven, driving frequency and safe driving habits.
If you choose a car insurance company with a telematics program, which is increasingly common, you may opt to enroll in the program. The enrollment process may differ between carriers, but you will typically either download the telematics app or use an in-vehicle device.
You may be surprised by the amount of information a carrier can retrieve about a driver via telematics. Examples of the type of data collected and used may include:
- Number of miles driven
- Time of day
- Where the vehicle is driven
- How often there is rapid acceleration
- Number of times hard braking occurs
- If hard cornering takes place
- If an airbag is deployed
Is a telematics program right for me?
While a telematics program may be a good way to save on car insurance, it may not be the right program for everyone. If you regularly practice safe driving habits and have low average mileage, a telematics program might be right for you.
However, if you have a long commute, regularly drive at night, drive in stop-and-go traffic that could cause abrupt stops or use risky driving behaviors behind the wheel, a telematics program may not be the right choice for you.
Some states are actively seeking to restrict the use of telematics programs, citing privacy concerns for drivers. California already has some restrictions in place that may limit the use of telematics programs. Other states are pursuing similar laws.
|Advantages of telematics||Disadvantages of telematics|
|More affordable rates for low-risk drivers||Privacy concerns for drivers|
|More accurate data for insurance companies for processing claims||Potential insurance cost increase for riskier drivers|
|Usage-based rates for drivers||Potential for unwanted tracking of activity and location|
Car insurance companies with telematics programs
Several insurance providers offer telematics programs to extend potential discounts to policyholders. The discount may be provided on a traditional auto insurance policy based on the data recorded. However, some carriers offer usage-based insurance, which may offer lower premiums based on the amount you drive.
Allstate offers the MileWise usage-based insurance program designed for low-mileage drivers. Drivers who enroll in this program pay for insurance per mile, while still choosing from standard auto insurance coverage types. Allstate recommends pay-per-mile insurance for low-mileage drivers such as those who work from home, commute using public transportation or retirees.
MileWise is currently only available in 21 states. If your state does not qualify for the MileWise option, DriveWise is another potential discount program. The DriveWise discount is based on safe-driving habits and could save you up to 40 percent on your premium.
Learn more: Allstate Insurance review
Nationwide has two telematics programs — SmartMiles and SmartRide. SmartMiles is a pay-per-mile usage-based program. The program is available in almost every state and rewards safe drivers with lower per-mile costs.
For those who do not want to enroll in the usage-based program, Nationwide offers SmartRide. Drivers may earn a 10 percent discount just by signing up for the telematics program, with potential savings up to 40 percent for safe driving habits.
Learn more: Nationwide Insurance review
Geico’s DriveEasy program is available in 33 states, plus Washington D.C. Like other telematics programs, your rate may fluctuate based on your driving habits. Drivers who participate could see increased rates as a result of unsafe habits, but Geico’s mobile app also allows users to track their driver score and habits in real time, which may make it easier to see where you could improve your driving.
Geico’s DriveEasy also has a Crash Assist predictive crash detection feature. If you hard brake, the app will ask if you were involved in a crash, then navigate to the claims department so you can start the process.
Learn more: Geico Insurance review
Progressive’s Snapshot is a usage-based program that tracks your driving habits through a plug-in device or telematics app. Snapshot is available in all states except California.
On average, drivers save $47 at sign up and then $156 when the program is completed, which will show on your next policy renewal. With Progressive, high-risk driving habits could cause premiums to increase, which happens to around 20 percent of drivers taking part in the Snapshot program.
Learn more: Progressive Insurance review
Other companies that offer telematics
Many other major car insurance companies also offer telematics programs. You may be able to save with by participating in these other telematics car insurance programs:
- American Family: KnowYourDrive and MilesMyWay
- Farmers: FairMile and Signal
- Liberty Mutual: RightTrack
- Root Car Insurance
- State Farm: Drive Safe and Save
- Travelers: IntelliDrive
- USAA: SafePilot
Frequently asked questions
Besides telematics programs, there are multiple other ways you may be able to save on car insurance. These include taking advantage of car insurance discounts, only buying the coverage that you need and comparing car insurance quotes to get the best rate on the coverage you need. You may also work to improve your credit score and avoid accidents and speeding tickets.
The cheapest car insurance company will depend on the type of coverage that you need and details about you, including your car type and driving history. Many insurers offer discounts and plans tailored to your needs, so compare quotes and shop around to find the cheapest car insurance company for you.
The cost of car insurance will vary depending on where you are located, the type of coverage that you need, and the type of car that you are covering. According to Bankrate data, the current national average cost for car insurance is $2,014 per year for full coverage car insurance, which includes comprehensive and collision coverage.