What is Telematics in Car Insurance?

We understand that with prices on the rise, you’re likely looking for ways to save money in every part of your life. If you’ve been recommended to add telematics onto your auto insurance policy to save some money, you may be wondering what exactly this service entails. 

As an agency, we’ve recommended telematics to many of our clients, and have even used it ourselves, so we’ve seen the many benefits it can offer policyholders who opt into the service. 

In this article we’ll review what telematics is, how it collects data, and what benefits it offers to your car insurance policy. 

How & what does telematics record? 

Telematics is used to collect information about your mileage and driving habits to be reviewed by yourself and your insurance provider. Driving data is simply recorded through the use of mobile apps or a small device provided by your insurance company for your vehicle. Telematics devices/boxes would plug into your car under the dashboard and can collect more accurate and additional information than mobile apps.

When choosing to enroll in a telematics program with your insurer, you give them permission to allow your vehicle, device, or app to send information about your driving to your insurance company. This service can offer real-time data regarding your driving habits, including speed, mileage, driving time, hard brakes, and other important information regarding your driving trends.

What benefits does telematics offer? 

If you opt to enroll in a telematics program with your insurance provider, the following are some potential benefits you could see added to your policy: 

Personalized driving data & feedback:

With the data recorded by the telematics device or app, you can receive real-time feedback personalized to your driving habits. This can allow you to be aware of how you’re driving so you can be a responsible driver.

The data can also be used by your insurance carrier to offer a more personalized insurance policy and premium based on your own driving. For example, data that proves you avoid risk when driving - such as speeding or driving late at night - could allow you to save money on your auto premium. 

Rewards for safe-driving & discounts:

Some insurance carriers offer discounts and rewards to policyholders who enroll in telematics programs, allowing you to save money just by signing up. Evidence of continued safe driving can also yield additional savings and discounts applied to your policy. 

It’s important for policyholders interested in enrolling to know that telematics can not increase your premium - at worst your premium will simply stay the same. 

Low-mileage discounts:

Telematics programs can also play an important aspect of low-mileage discounts for drivers who do not drive often. 

The average American will drive approximately 13,000 miles per year, but if you drive less than 7,500 miles per year, you may be eligible for a 5-10% discount depending on how little you drive, and the rate your insurance company designates for you. 

When enrolled in telematics, you and your insurance provider can keep track of your mileage to determine the discount applied to your policy. 

Wondering how you can take care of a car when it’s not being driven? For our top tips on how to make sure your car is good to drive when you need it, check out this guide: 6 Tips to Maintain a Car You’re Not Driving.

Tracking the best ways to save

Now that you know more about the benefits of telematics, you can decide if it sounds like the right option for your policy. 

We understand that the phrase “data tracking” can raise some red flags, especially in today's tech conscious world. But be assured that your telematics app or device would only record data while you’re driving, and it would be an easy way to save money and maintain your own safety while driving. 

Still interested in other money saving options for your car insurance policy? Then head over to our guide all about our 13 ways you can save on your auto insurance.