How Car Insurance Monitoring Can Save You Money
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While we’d all probably prefer to buy a car insurance policy, pay the bill every month, and never think about it again, taking this route could mean leaving money on the table.
Many car insurance companies now use car insurance monitoring devices — telematics — to track your driving habits like speed, accelerating and braking, how often you drive, and even what time of day you drive. If you’re a safe driver, usage-based insurance that uses telematics to determine rates could help you to save money on your premiums.
In this article, we’ll cover how car insurance tracking devices work, whether they’re worth it, and how to secure the best rates for your situation.
Find Your Best Car Insurance Rates
Find Your Best Car Insurance Rates
How Car Insurance Monitoring Works
Auto insurance companies do a lot of juggling to come up with the price you pay for insurance. Traditional auto insurance policies take into account factors including your driving record, age, location, job, and even your credit score.
Telematics-based insurance takes this one step further and actually monitors your driving. If you purchase a usage-based car insurance policy, you’ll need to install a telematics device or download a smartphone app. Then, your car insurance provider will begin tracking driving data each time you hit the road. Usage-based insurance considers driver behavior like speeding, acceleration, hard braking, cornering, sharp turns, phone usage, and more.
Safe driving behavior can help lower your rates, while reckless driving behavior could mean you pay a higher premium. Car insurance that monitors your driving is typically optional, but some insurance companies, like Root, require all drivers to use usage-based insurance.
How Long It Takes
The amount of time you need to use the tracking device or have the mobile app installed varies depending on the insurance company. For example, Progressive’s Snapshot program requires continuous monitoring. Yet, Liberty Mutual’s Right Track program only requires 90 days of monitoring, after which drivers can lock in a discount for the duration of their policy.
How Much You Can Save
How much you can save depends on both the insurance provider you go with and your driving habits. Some insurance companies argue that telematics-based insurance can be especially helpful for drivers with other factors that may work against them.
For example, if you’re a young driver, usage-based insurance could prove to an insurer that you’re a safer driver than your peers, which could help to lower your rates. Insurers that offer discounts for usage-based driving include:
- Liberty Mutual: The Right Track program from Liberty Mutual could save drivers up to 30% off.
- Nationwide: The SmartRide program offered by Nationwide could save drivers up to 40% off.
- Travelers: The IntelliDrive program from Travelers could save drivers up to 30% off.
- Metromile: Metromile offers pay-per-mile car insurance, which is similar to usage-based car insurance, and could help drivers save up to 47%.
- Root: Root uses telematics-based insurance for all policies, and according to the insurer, drivers could save up to $900 per year.
In some cases, drivers can receive an automatic discount just for signing up. Many insurers pledge not to use the information gathered by usage-based tracking programs to raise your rates — only to lower them. But, some insurance companies could increase your auto insurance rates due to your driving habits, so make sure to read the fine print.
Other Factors that Affect Your Rates
Even if you enroll in a usage-based car insurance program, that’s not the only factor affecting your rates. Car insurance companies also take into account personal factors, like your driving history, and external factors, like the rate of insurance fraud.
Personal Rating Factors
Some examples of personal factors that could affect your rates include:
- Marriage: Statistics show that married people experience fewer claims, so your insurance rate might be affected if you get married.
- Change of address: A change of address might affect your insurance price. Premiums depend on how often claims occur, so things like living in a city with more drivers will result in a higher premium than living in a more rural area.
- Driving history: Even if you’re not at fault, getting into accidents might raise your insurance price. Filing multiple claims in one year could increase your premium upwards of 86%.
- Profession: Insurers see some jobs as riskier than others. For example, salespeople and lawyers work long hours and may spend a lot of time on the road, so they might have a higher premium than an 8-5 desk job. If your job changes, your premium might see a change too.
- Credit score: Many insurance companies use credit score as a factor when calculating your premiums because people with higher credit scores tend to get in fewer accidents. So, if your credit score takes a hit, you might notice a change in insurance prices.
Outside of the personal rating variables that affect your rates, there are other reasons premiums might increase. These are usually on a wider scale and applied to everyone at once. Some examples include:
- Insurance fraud: Insurance fraud is an $80 billion empire. Insurance companies diligently pursue and fight against fraud, but fake insurance claims and staged accidents still affect everyone by increasing overall costs. They eventually share that burden with policyholders. So if fraud increases, premiums might too.
- Gas prices: Interestingly enough, insurance prices go up when gas prices go down. Lower gas prices inspire more people to drive, which increases accidents and, subsequently, car insurance rates.
- Rising medical/repair costs: If mechanics start charging more for services, insurance companies will spend more resolving claims. Policyholders will feel that in their wallets. The same rationale applies to medical costs for those in accidents.
- Weather: If your area gets hit with unexpected storms and insurance has to pay out to repair a lot of damaged cars, premiums might go up.
Is Car Insurance Monitoring a Good Idea?
Car insurance monitoring could save you money — it all depends on how you drive. Many drivers may see a rate decrease after opting for a usage-based policy. When coupled with other car insurance discounts, like bundling policies, it could knock a nice chunk of change off your premium each month.
That said, usage-based car insurance isn’t the right fit for everyone. Some drivers may have concerns about privacy since telematics programs track not only how you drive but where and when you drive. With modern vehicles collecting more and more data about their owners, drivers may understandably want to claw back some anonymity from manufacturers and insurers by opting out of tracking programs.
And while most of us may strive to be good drivers and model sound behavior on the roads, usage-based insurance programs may not be the best fit for those with driving habits that don’t match up with an insurer’s safety standards. Whether that means going a little above the speed limit on your way to work or driving late at night to visit family or friends, usage-based insurance may not be a good deal if you have driving habits that insurance companies don’t like.
Telematics-based insurance is one way to lower your insurance premium, but it’s far from the only one. One of the best ways to lower your rates is to shop around and compare personalized quotes from different insurers. Compare.com makes it simple to quickly and easily compare rates from some of the top insurers nationwide.
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