Telematics Insurance
If you’re searching for auto insurance coverage, you might see companies referring to a telematics insurance program that can help you drive safely and save money. This guide explains how these telematics programs work, the benefits, the potential drawbacks and who they might be good for.
What Is Telematics Insurance?
Telematics insurance (sometimes known as usage-based insurance) is not actually a type of insurance coverage. It simply refers to when companies use tracking technology to assess risk and provide a more personalized car insurance rate based on a specific driver’s behind-the-wheel behavior, according to the Insurance Information Institute (III).
How Does Telematics Insurance Work?
Telematics, generally speaking, is a way to monitor assets (like vehicles and other equipment) using on-board diagnostic information, mobile apps and GPS technology, according to Geotab. Essentially, telematics can help monitor vehicle speed, miles driven, time of day driven, and more.
Many insurers allow drivers to sign up for a voluntary telematics insurance program that uses a smartphone app or device to collect data in categories like those listed above. Insurers then use the data collected to provide a more individualized rate that closely aligns with a driver’s risk profile.
For example, if a driver signs up for a telematics program and never speeds, doesn’t brake erratically or only drives a few miles each day on average, their insurer might see them as a lower risk and drop their rate in the future.
Why Choose Telematics Car Insurance?
Telematics insurance offers some undeniable benefits that could entice you to sign up.
Potential Savings on Car Insurance Premiums
Not all telematics programs are equal, but most of them offer drivers the chance to save significantly on their coverage. For example, Direct Auto’s DynamicDrive® program* offers up to 10% in savings at sign up, and safe drivers have the chance to save even more at renewal.
Encourages Safer Driving
Sometimes drivers genuinely aren’t aware they’re driving too fast or braking too suddenly. Telematics data can help you monitor these behaviors and become a safer driver. And because telematics programs reward safe drivers with lower premiums, there is an incentive to become a safer driver.
Is Telematics Insurance Worth It?
To determine if telematics insurance is right for you, it’s important to weigh the pros and the cons.
For example, some insurers might offer a generous discount at sign up. They might also reward your safe driving even more when it’s time to renew your policy. Plus, by looking at your driving insights along the way, you’ll be able to cut out potentially dangerous driving behaviors and build safe-driving habits.
However, since rates are shaped by your driving performance, speed violations, sudden braking and lots of miles logged could lead to a rate increase. In other words, telematics programs might not be the best option for every driver.
Who should consider telematics car insurance?
So, which drivers should consider joining a telematics program? Well, if you have a history of safe driving or are convinced you can drive safely, telematics could help you secure a lower rate. Additionally, if you don’t drive many miles, you might be seen as a lower risk and could see your premium fall at renewal. However, if you’re prone to speeding and log lots of miles, telematics could negatively impact you.
Telematics Insurance For Businesses
Telematics insurance isn’t just for individuals, though. Many businesses are taking advantage of the benefits. The data collected helps fleet managers improve decision-making around asset tracking, fuel consumption, truck dispatching and more, according to Intellias. Those adjustments, in addition to potentially lower premiums, can help drive profitability.
How To Get Started With Telematics Insurance
If you think telematics insurance is right for you, enrolling is generally straightforward. Please note, you need to double-check your insurer has a program (or find an insurer that has one). Also, please note that these steps may vary depending on your insurer.
Join your insurer’s telematics program.
Depending on your insurer, you might be able to enroll during the quoting process. You might also be able to join later by enrolling online, inside your insurer’s app or via text message.
Install your telematics device or app.
Once you’ve enrolled, follow all necessary setup instructions. Download any apps and allow necessary permissions or install any telematics devices your insurer sends you. This will enable your insurer start logging trips that could potentially save you money in the future.
Maximize your telematics insurance benefits.
Once you’re enrolled, it’s time to take advantage of the program. For example, with DynamicDrive, drivers can use insights about their driving to cut down on poor driving behavior (like speeding or distracted driving) and build positive, safe-driving habits. This could result in a lower premium at policy renewal.
Key Takeaways About Telematics Insurance
Bottom line, telematics insurance can be a great way to get a more personalized rate on your auto insurance coverage. The safer you drive, the more likely you are to save money on your premium. However, if you’re not committed to safe driving, telematics insurance could result in higher premiums. So, evaluate your situation to determine if it’s right for you.
Telematic Car Insurance FAQs
What types of data does telematics insurance track?
The information collected can vary from company to company. But, for example, Direct Auto’s DynamicDrive program keeps track of driving time of day, distracted driving due to phone use, hard or extreme braking and excessive speeding.
How is my driving data used to set my insurance rate?
The exact process may vary from company to company, but generally speaking, insurers take a comprehensive look at the trips you’ve logged to determine if you’re a safe driver or if you’re a little riskier to insure.
Can I use my existing car insurance with a telematics device?
It depends. If your current insurer has a telematics program, you may be able to enroll at any point during your policy term, or you may have to wait until renewal. If your current insurer doesn’t have a telematics program, you might need to switch to another company.