Car insurance with telematics

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Telematics data is simply information an auto insurance carrier captures about your driving habits via a mobile app or physical device. Telematics insurance is when you purchase a policy where the insurance carrier crafts a policy and premiums based on this information that is collected. This is also a form of usage-based insurance, or UBI, and offers you the potential to save on car insurance premiums. The technology has actually been around for over a decade, but the use of telematics is continuing to rise in popularity. As the technology has evolved, carriers use telematics to create pay-per-mile or pay-per-usage policies, which ultimately may save the driver from overpaying on car insurance.

What is telematics used for in car insurance?

Insurance carriers use telematics to create usage-based rates for premiums. With the data collected, a policy can be curated to fit the exact needs of the driver. Unlike a traditional auto policy, where the rates are based on historical data for drivers as a whole, telematics is a way to retrieve actual personal data, which in turn helps customize a policy.

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 includes:

  • 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

Advantages of telematics

Because a driver is submitting realistic data, and not simply estimates or “best guesses,” an insurance carrier uses this for adjusting premium rates. The result may be more affordable rates, especially for low-risk drivers. When a driver knows an insurance carrier is monitoring almost every driving move, it may make them more likely to drive safer and use extra precautions.

Telematics also provide advantages for the insurance companies, which also helps keep rates down. The data can be used if there is an accident, such as the speed at the time of the incident or the location. Having this information at hand may help contribute to less fraud with filing claims.

Disadvantages of telematics

While lower rates may be incentive enough for drivers to switch to telematics insurance, there is one major disadvantage to be aware of. The first is with privacy concerns. Not all drivers are comfortable with the amount of data being collected. The telematics not only collects personal information, but it uses GPS technology to track the location of drivers.

Additionally, if you tend to drive above the speed limit, drive aggressively, brake excessively or quickly or other perceived high-risk behaviors then utilizing telematics based insurance may cost you more in the long run.

Telematics insurance discount programs

Several insurance providers offer telematics insurance discount programs. The discount may be provided on a traditional auto insurance policy based on the data recorded via the telematics. However, some carriers offer usage-based insurance, which also offers lower premiums.

Allstate

Allstate offers the MileWise usage-based insurance program, although it is limited to 18 states at the moment. Drivers who enroll in this program pay for insurance per mile, while still getting the benefits of a traditional auto policy.

If your state does not qualify for the MileWise option, DriveWise is another discount program offered. The discount is based on safe-driving habits recorded through the mobile app and may end up saving you up to 40% on premiums.

Nationwide

Nationwide has two telematics programs — SmartMiles and SmartRide. SmartMiles is the pay-per-mile usage based option. The program is available in almost every state and rewards safe drivers with lower per-mile costs, which benefits low-mileage drivers the most.

For those who do not want to enroll in the UBI program, SmartRide is a discount program where you earn 10% by signing up for the telematics program with the possibility of earning up to 40% in discounts. It is a traditional auto policy but with a discount for allowing Nationwide to monitor your safe driving habits.

Geico

In 2019, Geico introduced the DriveEasy program. It is now available in 23 states, plus Washington D.C. Like other UBI programs, your driving habits are recorded and then your rate is calculated. What sets Geico’s DriveEasy program apart from others is the ability to enroll your entire family in it via the family share feature.

Other ways to save

While telematics and pay-per-mile usage may help you save significantly, there are other discounts available if you do not want your driving constantly monitored. Other ways to save include:

  • Bundling: Purchasing your auto insurance from the same carrier as your homeowners or renters insurance is one of the easiest potential ways to save. Almost all carriers offer a multi-policy discount making this discount even easier to obtain.
  • Multi-vehicle: If you have more than one vehicle you need to insure, then a multi-vehicle discount may make it worth your while. Some carriers offer significant discounts to drivers who have more than one vehicle on the policy. For example, Geico advertises potential savings of up to 25%.
  • Defensive driving: If you would rather save by taking an in-person or online course, then a defensive driving course may be the answer. Most carriers offer a potential discount for attending an approved course.
  • Good student: If you’re a student enrolled full-time in college or high school and you maintain a certain GPA, chances are you may be able to find an insurance carrier willing to reward you for it. Most carriers offer this discount to current students as long as you meet the requirements and submit documentation on a regular basis.

Frequently asked questions

What is the average cost of insurance for full coverage car insurance?

The average cost of car insurance in the U.S. is $1,674 per year. This is based on a full coverage policy, which includes comprehensive and collision coverage. Keep in mind, since rates are based on personal factors, your premiums could be higher or lower than the national average.

Do I have to use a smartphone for usage-based insurance?

Not all UBI programs require the use of a smartphone, although this is the most popular option. Nationwide uses an installed device for its telematics insurance program SmartMiles, and is one example of a company not requiring a smartphone.

What kind of driver is telematics car insurance best suited for?

Most usage-based programs are ideal for low-mileage drivers. If you are a student or someone with a short commute, you may find the UBI is the least expensive option. A trusted licensed insurance agent can walk you through the options to help you determine if the telematics program is worth considering.

Written by
Sara Coleman
Insurance Contributor
Sara Coleman has three years of experience in writing for insurance domains such as Bankrate, The Simple Dollar, Reviews.com, Coverage.com and numerous other personal finance sites. She writes about insurance products such as auto, homeowners, renters and disability.
Edited by
Insurance Editor