Can Telematics Help You Save on Auto Insurance?
Telematics is a growing trend in insurance today.
Telematics focuses on usage-based insurance by tracking a driver’s habits and actual miles driven each month to determine how much they can save on their annual premiums. While they are attractive, you need to understand the limitations of these systems, the risks, and determine if they are truly worth it in the end.
How Much Can You Save Using Telematics?
Most major insurance companies today offer telematic discount opportunities, and participation in their program is free of charge. Some will ship you the device for free, but some might charge a small fee for doing so.
Unfortunately, the “savings” really depends. Not only does it depend on how much you drive, but your driving habits. Certain habits could raise your premium rather than reward you with lower premiums. So, you would want to consider the following on how they can potentially save you money (or cost you).
How Many Miles You Drive
You listed on your insurance application that you only drive 12,000 miles per year. Were you listing that to get the lowest premium possible? If so, when you use telematics, it could show that you drive 15,000 miles per year – which could increase your premium.
Also, if you make a lot of weekend road trips, it may increase the miles per month you average, and even lead to a hike in insurance premiums. For programs that monitor your driving over a short period, such as 90 days, you should refrain from any vacations to avoid increased premiums.
Fighting Back against Statistics
One way you could save is fighting against higher premiums because of age. For example, you are a young driver with poor credit, which means you are now a risk for the insurance company and pay more per month than someone with good credit and a few more years of experience.
When you use telematics and exhibit safe driving habits, the insurance company will reward you with a lowered premium – helping you get a better premium than paying for factors out of your control.
Your Driving Habits – Are they Safe?
Are you a stop and start type of driver? Perhaps you like to accelerate quickly onto the interstate? Think of your driving habits, how safe they are, and how they will translate when telematics are watching your every move. These devices can track everything from sudden braking to unsafe acceleration and average speeds. So, it might not save you as much as you think if your habits are considered too risky.
The Discounts Might Not be Substantial
It is a common misconception that if you participate in a telematics program, you will save hundreds each year. In reality, most drivers only see a few dollars per month shaved off their premiums. If you feel you are paying too much for auto insurance, and you already used a telematics program, then you should shop around – because the issue might not be you, but the insurance company you’re working with.
What are the Most Popular Telematic Insurance Programs?
Most insurance companies have a form of telematics that their policyholders can use to save on insurance, but they vary in how they work and the savings applied.
Progressive was one of the first to offer these programs. On average, most drivers would save under $100 per six-month period.
The SnapShot tracks:
- Miles drove
- Time of day you drive
- Changes in speed suddenly
- And overall habits
You must use the device for a full six-month period before the company can consider you for any discounts.
Another program is Drivewise from Allstate. When you use the program, you get three percent cashback on your premium for safe driving. You can also look at your data through the app, which tracks up to your previous 100 trips and shows rewards earned for those trips. Savings can be almost $200 per six-month period.
Some items tracked by Drivewise include:
- Your safe speeds
- Safe braking
- Time of day you drive
- Mileage of your trips on average
State Farm Drive Safe and Save
State Farm started a telematics program to keep competitive, but they offer two options: mobile device paired with a Bluetooth you install in your vehicle or using your car’s existing OnStar system.
You can, however, save up to 50 percent on your premium with State Farm’s program, but they put heavy emphasis on mileage; therefore, if you drive over 7,500 miles per year, this program will not yield savings.
Also, the program doesn’t put much emphasis on other factors outside mileage like its competitors.
Esurance gives you up to 10 percent off premiums after measuring everything from time of day to speed to braking and even mileage. Costs can fluctuate depending on the data received, and only certain states can use the Esurance telematics program – therefore, you will have to see if your state qualifies.
Nationwide’s program gives an instant 10 percent off your premiums too, and then each time you have a renewal, they will review the data and determine if you can save any further. With SmartRide, you can save up to 40 percent total. They have an app and tracking device that are required to be installed to participate.
SmartRide looks at idle time, night driving, hard brakes, fast acceleration, and overall mileage when deciding if you qualify for a discount.
Bottom line, there are plenty of providers out there offering telematics, but you need to consider whether it applies to your driving habits and if you would save money by using them. If not, it might be time to shop around for a new insurance company.