How Telematics Can Save You Money on Car Insurance

An intriguing new trend in the car insurance industry can help you save money on car insurance premiums based on how you drive. It's called telematics, also known as "pay-as-you-drive" or "usage-based insurance." 

With telematics car insurance, you allow your car insurance company to collect data about your driving habits. Many car insurance companies now offer special telematics insurance programs that offer big discounts on car insurance. 

Let's look at how telematics car insurance works, and why it might be a great deal for discounts.

What is telematics car insurance? 

Mobile technology now allows car insurance companies to track detailed data about people's driving -- but only with the customer's permission. Telematics technology can include mobile apps or data-collecting devices installed on your vehicle. For example, if you sign up for State Farm's Drive Safe & Save™ telematics program, the company sends you a Bluetooth beacon that you stick to your windshield, and it pairs with a State Farm mobile app.  

Car insurance companies can use these devices to track your driving data, such as:

• How fast you drive
• Your acceleration rate
• How hard you hit the brakes
• How fast you take corners
• Distracted driving

By practicing safer driving habits, you can show your car insurance company you're a lower-risk driver -- and you deserve a discount. The telematics devices and mobile apps can also give you personalized feedback for how to be a safer driver.  

How to get cheap car insurance with telematics 

You can get telematics car insurance with a few different insurance companies. Here are a few programs -- and how much you can save if you sign up:  

• Nationwide: SmartRide® (save up to 40%)
• Progressive: Snapshot® (save an average of $231 per year)
• State Farm: Drive Safe & Save™ (save up to 30%)

Geico, one of our picks for the best cheap car insurance, also offers a telematics program called DriveEasy, but the company does not promise a specific amount for how much you can save. 

Why telematics car insurance can be a good deal 

Telematics unlocks big opportunities to improve driver safety and save money on car insurance premiums. The best car insurance companies that offer this technology can help you save significant money. If you're tired of paying money every month for expensive car insurance premiums, downloading an app and sticking a Bluetooth device to your vehicle might be an easy way to save money -- and get an extra driver safety feature to help avoid car crashes. 

Possible downsides of telematics car insurance

Some people might have privacy concerns about telematics, and might not want to share their driving data. Savings are not guaranteed -- for example, Progressive says that about 2 out of 10 drivers in its Snapshot program end up paying higher rates because of higher-risk driving. 

And some insurance companies still have some bugs to work out with their telematics apps. For example, some Android users have complained that Geico's telematics app hurts their phones' performance and is excessively intrusive by constantly accessing location and music apps. Car insurance companies promise to only collect the data that is needed for their safe driving metrics. But be sure to read the fine print before you sign up for telematics so you understand how the app will work. 

Bottom line: If you want to save money on car insurance premiums, and you're comfortable with sharing some mobile app data with your insurance company, signing up for telematics can be a quick way to earn discounts. Make sure you understand the requirements and read app reviews to see how other people's experiences have been. And in case telematics is not a good enough value or is too much hassle, you can opt out anytime.