Surprise Savings: Discovering Hidden Car Insurance Discounts

Car insurance is in the background noise of everyday American life; pretty much everyone in this country drives a car, and just about all states require everyone to have car insurance. You might think that car insurance is a mundane industry, where nothing exciting happens, where everything stays the same forever, right?

Wrong! The past few years have seen some intriguing innovations with mobile technology and data analytics for car insurance. These new technologies are opening up powerful new opportunities for people to earn car insurance discounts.

Mobile technology and data analytics are launching entirely new ways of providing car insurance. With a traditional car insurance policy, rates are determined by simple details like the age of the driver; the make, model and mileage of the vehicle; and the location where the car is parked at night. But with new mobile technologies, car insurance is getting more digital, dynamic, and connected to everyday life. And using the power of data, insurance companies can offer more sophisticated, personalized car insurance discounts.

Two big new innovations in car insurance are already available in many states, and have the potential to offer big discounts to customers: telematics and pay-per-mile. Most people probably don't know about these new car insurance options. But you should. Telematics and pay-per-mile car insurance can offer big discounts, and are worth considering for your next car insurance policy.

Let's look at these two innovative types of policies, and how they can deliver surprising car insurance discounts.

1. Telematics car insurance discounts for safe driving

Telematics is a new technology that more car insurance companies are starting to offer to customers to help them track their driving behaviors and practice safer driving habits. This type of car insurance is also known as "pay-as-you-drive" or usage-based insurance (UBI), because it gives you discounts based on how you actually use your car -- how many miles you drive, what time of day you drive, and how safely you drive.

With telematics car insurance, your car insurance company gives you a telematics device, usually a mobile app, that works with your car to track your driving performance. Driving data captured by the telematics device might include miles driven, speed, braking time, and which times of day and locations you drive. Telematics can also reduce distracted driving by helping drivers avoid using their mobile phones while behind the wheel.

By learning more details and collecting data about how you drive, car insurance companies can give you a personalized rate on car insurance -- and that can mean big discounts. For example, Progressive offers a telematics insurance program called Snapshot® that claims to save drivers an average of $231 per year. Nationwide's telematics program, SmartRide®, offers an immediate 10% discount for signing up, with the chance to earn discounts of up to 40% based on your driving data.

Signing up for telematics car insurance might not be everyone's first choice. Some people might have privacy concerns, and not want to give their insurance company such an intimate view of their driving habits. But if you're comfortable with sharing your driving data, and are curious to try a new way of doing car insurance, your insurance company will share some big savings with you.

2. Pay-per-mile car insurance discounts

Another type of innovative car insurance that has emerged in recent years is pay-per-mile car insurance. This is a type of policy where you can earn a discount by driving fewer miles. After all, car insurance companies have to pay more claims when people spend more time on the road; fewer miles driven means fewer collisions and accidents.

One type of pay-per-mile car insurance that is already available in most states is Nationwide's SmartMiles® program. If you sign up for Nationwide SmartMiles, you agree to let the insurance company track the mileage on your car with a small mobile device. Each month, you pay a mileage-based bill.

To calculate your SmartMiles bill, Nationwide charges you a fixed monthly "base rate," along with $0.07 per mile. So let's assume that your base rate is $60 and you drive 500 miles in a month. You'd pay $35 for the miles, plus $60, for a total of $95. This is cheaper than a typical Nationwide policy, which costs $133 per month on average. In this example, you'd save $38 per month, or $456 per year, by paying for car insurance by the mile.

Pay-per-mile car insurance might not be worth it if you drive 1,000 miles or more per month. Exact rates and details will depend on where you live and other aspects of your car-driving lifestyle. But if you find that your car is gathering dust in the garage, if you don't have to commute to work, if you don't have kids at home who are constantly needing to be ferried to soccer practice, then pay-per-mile tech might help you save money on car insurance.

The bottom line

Car insurance doesn't have to be boring, and you don't have to be stuck paying for a fixed monthly car insurance premium that feels overpriced for how few miles you drive. Instead, consider getting in on the hidden discounts of telematics and pay-per-mile car insurance. The digital age has come to car insurance, and the discounts are highly promising!