Telematics Insurance Coverage

You may have heard of telematics, which uses telecommunications and informatics (data science) to monitor driving through GPS and onboard diagnostics, but what is telematics insurance? 

Well, telematics car insurance, referred to as Usage-Based Insurance (UBI) in the insurance industry, is a type of auto insurance that tracks mileage and driving behaviors. So how does telematics affect auto insurance? 

If you have good driving habits, it’s possible to lower your auto insurance rates for all types of auto insurance with telematics car insurance.

Read on to learn how telematic car insurance can reduce your insurance costs.

If you need to consult with a qualified insurance attorney, enter your ZIP code in our tool above to get started in your search.

What Telematics Means on Car Insurance

Telematics as it relates to auto insurance is a system that allows insurance companies to record and measure a motorist’s driving operations in order to tailor car insurance rates based on specific driving habits. The use of telematics in the insurance industry is rapidly growing.

Telematics works through technology like mobile applications on your phone or plug-in devices installed in your vehicle. These technologies record driving data, like speed, braking, signaling, swerving, turning, and other driving maneuvers. The system records real-time data on your vehicle’s mileage, fuel, GPS location, speed, and engine diagnostics. 

Here are some of the most popular telematics devices used by top car insurance companies.

Insurance companies using telematics take that driving data and calculate a driver score. According to the National Association of Insurance Commissioners (NAIC), the basic idea of usage-based car insurance is that a driver’s behavior is monitored directly while the person drives, allowing insurers to more closely align driving behaviors with premium rates.

The more responsibly a motorist drives, the better the driver score, which leads to lower auto insurance premiums.

Enter your ZIP code below to compare cheap insurance rates.

Auto Home Health Life Business Motorcycle Pet Medicare Rental

 Secured with SHA-256 Encryption

The Benefits of Using Telematics

The most popular benefit of using usage-based insurance is saving money, but there are many others..

Lower Insurance Rates

In addition to lowering your car insurance premiums, there are several benefits to telematic auto insurance.

Safe Driving

A significant benefit from telematics and auto insurance is being more mindful of your driving and, as a result, practicing better, safer driving each time you drive. Your personal driving data is available at your fingertips, on the app or on your provider’s website, so you can get accurate feedback on specific driving skills you may need to improve, like taking corners or merging speeds. 

Improve Driving Record

Motorists with a history of car accidents or speeding tickets often find themselves paying high car insurance rates.

Drivers who have driving-related convictions in the past, but who have improved their driving habits through safe drive classes or otherwise, can benefit from telematics, which can lower premiums based on good driver scores.

The Downside of Using Telematics

While telematics can save you money and make you a better driver, your rates may also increase or claims may be denied for risky driving.

Our experts detail items to consider when signing up for a telematics program.

https://youtu.be/DG1YbwS7coo

If you’re confident in your safe driving ability, telematics may offer significant savings.

Factors Affecting Your Car Insurance

Insurance companies rely on usage-based insurance statistics to determine insurance rates based on known risk factors, and driver information that affects those factors. Providers use algorithms to assess and determine a driver’s risk level in relation to those factors, and then calculate a rate based on the risk level.

Simply put, a higher risk level means more costly insurance.

According to the Insurance Information Institute (III), insurance companies use many factors to help determine the cost of car insurance. Here is a list of factors frequently used to calculate auto insurance rates.

Age

The insurance industry has extensive data to support the assumption that age impacts driving. The Insurance Institute for Highway Safety (IIHS) found that teen and elderly drivers are more likely to have car accidents than drivers between the age of 30 and 69.

Studies show that teens are more easily distracted and seniors have slower reflexes, which makes them riskier drivers and results in higher insurance rates. Rates typically decrease by more than 10% when drivers reach the age of 25. 

Claims and Coverage History

Insurance companies are very interested in your claims history. Your rates will likely be impacted by claims made against you, or if you’ve made policy claims in the past, either with them or your previous insurers. At-fault determinations against you will likely increase your rates. 

Multiple claims can also affect your car insurance rates. Multiple claims within a relatively short period of time will be viewed unfavorably by insurance companies. If you have a lengthy claim history, they predict a risk of you making future claims and therefore increase your rate.

Although it shouldn’t matter that a driver bounces around to different insurance companies after the end of a policy, insurance companies don’t like to see lapses or gaps in coverage. If you’ve let your insurance policy lapse or have driven without insurance for an extended period of time, you’ll be deemed a risky driver.

So, if you can help it, never let your car insurance coverage lapse, especially for nonpayment. If your premiums are too high, check in with your adjuster and see if there is anything they can do to lower your rate or shop around to find cheaper insurance you can switch to.

Coverage Types

The car insurance coverages and deductibles you choose factor into your rate. Generally, the types of car insurance coverage are:

• Liability
• Collision and Comprehensive
• Uninsured/Underinsured Motorist, and
• Medical Payments/Personal Injury Protection (PIP)

Each state has mandatory driving insurance laws, but having minimum insurance coverage won’t cover accidents or damage to your vehicle from weather, theft, or civil unrest.

That said, extra coverage and low deductibles will increase your insurance costs. That’s because your provider is giving you more coverage for a broader range of damages, which increases their expenses.

Credit Rating

Some states prohibit insurers from using credit history as a factor in determining rates. But in those states where it is not prohibited, credit history does affect rates and you can expect higher premiums if you have a low credit score.

One of the reasons is that insurance industry research has found a correlation between low credit scores and multiple claims, inflated claims, and fraudulent claims. Statistics also have shown that policyholders with low credit scores are more likely to miss a payment.

Therefore, motorists with poor credit scores are often required to pay a significant portion of the premiums in advance to secure the policy.

Driving Experience

Practice makes perfect. So it’s only logical that newer drivers, with less experience, tend to have higher premiums and larger deductibles. But with safe driving habits, a clean driving record, and experience over time, rates will go down.

Driving History

Car insurance companies know that driver behavior directly affects the risk to an insurer and the likelihood of an accident. Insurance companies have access to your driving record and will increase your rates significantly if you’ve been involved in multiple accidents or you have several moving violation convictions.

Simply put, the better your driving record, the lower your car insurance. Many companies offer good/safe driver discounts as well.

Gender

Even though statistics show men are more likely to have car accidents, in some cases their rates tend to be slightly lower than rates for women drivers. Make sure you talk with your provider to make sure they offer comparable insurance rates for males and females, assuming all other factors are relatively equal.

Female policyholders should make it a point to highlight safe driving records, length of driving history, and other positive data points to make sure gender bias does not affect their rates. 

Geographical Location

Your ZIP code will always factor into your auto insurance. Insurance companies use population, traffic, accident, and crime statistics to determine risk levels for motorists. In general, the risk of accidents, theft, and other insurance claims is higher in major metropolitan areas than in rural areas.

Therefore, if you live in a city or large town, your insurance probably will be more expensive than if you live in the suburbs, country, or more remote areas.

Marital Status

Married individuals will likely see lower rates than their single or divorced counterparts. The National Institute of Health found that single motorists were two times more likely to be in an auto accident than married drivers. The study found that married people drive less and not as far. Married drivers also tend to have safer driving records and fewer accidents. 

Mileage and Usage

The number of miles you drive a year affects your rates. Insurance companies will always ask for your annual mileage when you apply for insurance. It makes sense that the less you drive, the less opportunity for you to get in an accident. If you’re looking to lower your rates, think about whether you have reduced your mileage.

For example, during the COVID-19 pandemic, many insurance companies reduced premiums for policyholders who stopped driving to work.

It also matters how you’re using your car. If you routinely drive your car on a highway twice a day, 5 days a week, your rates will be higher than if you only drive occasionally. It also matters if you use your car primarily for business purposes.

Your rates could be higher depending on whether equipment or inventory will be in the vehicle and if you have increased driving time due to the business.

Vehicle Type

The make, model, year, and purchase price of the car you drive definitely will affect your insurance premium rates. Also, whether your car is new or used will affect your auto insurance quote.

The automotive industry, including car manufacturers themselves, records statistics on safety tests, accident rates, repairs, and theft for most vehicle models. Insurance companies also have their own data on which vehicles have more claims. Again, the higher the risk of a claim to an insurance company, the higher your rates will likely be.

Enter your ZIP code below to compare cheap insurance rates.

Auto Home Health Life Business Motorcycle Pet Medicare Rental

 Secured with SHA-256 Encryption

How Mileage Affects Your Car Insurance

As stated above, one of the main factors used to calculate your car insurance is your annual car mileage, i.e., the number of miles you drive each year.

The more you drive, the greater the risk you’ll get in an accident and need to make a claim. That means if you have a high annual car mileage, your car insurance premiums will likely be high.

Case Studies: Telematics Insurance Coverage

Case Study 1: Safe Driving Pays Off

Mike, a cautious driver, enrolls in a telematics insurance program offered by a leading insurance company. Using a telematics device installed in his vehicle, the insurance provider monitors his driving habits, including speed, braking, and mileage.

Mike consistently demonstrates safe driving practices, maintaining a high driver score. As a result, he receives a substantial discount on his car insurance premium, reducing his overall insurance costs by 25% compared to traditional insurance policies. By embracing telematics, Mike enjoys both financial savings and improved driving awareness.

Case Study 2: Improving Driving Habits

Sarah, a relatively new driver with a limited driving history, chooses a telematics insurance plan to help her become a better and safer driver. The telematics app on her smartphone tracks her driving behaviors, providing real-time feedback on her driving skills. Over time, Sarah actively works on improving her driving habits based on the app’s insights.

Her efforts pay off, resulting in a significant increase in her driver score. As a reward for her commitment to safe driving, Sarah’s insurance premiums decrease by 20%, making her coverage more affordable and encouraging her to continue driving responsibly.

Case Study 3: Tailored Coverage and Savings

John, a frequent traveler, utilizes telematics insurance to customize his coverage based on his actual driving habits. With the help of a telematics device, John can accurately record his mileage and assess the specific risks associated with his driving patterns.

Recognizing that he spends extended periods away from home, John opts for pay-per-mile insurance, which charges him based on the number of miles driven. This tailored approach allows John to save approximately 15% on his insurance costs, ensuring he pays for coverage only when he actively uses his vehicle.

Get Help

If you’re a safe driver and have a good driving record, you should consider telematics car insurance. You could be rewarded with lower premiums for just continuing your responsible driving behaviors. If you’re weighing the pros and cons of telematics auto insurance, talk with an insurance agent who can help you decide if it’s right for you.

You can put your ZIP code into our search tool to talk to a provider in your area about how telematics affects your rates, and to get a quote to make sure you’re not already paying too much.

 

Enter your ZIP code below to compare cheap insurance rates.

Auto Home Health Life Business Motorcycle Pet Medicare Rental

 Secured with SHA-256 Encryption