Car insurance prices surged in 2023, and many people are feeling the financial pain. If you want to free up some extra cash flow in your monthly budget, saving money on car insurance can often be an easy way. But not every strategy to save money on car insurance is a good idea.
Raising your deductible can lower your premiums, but it might leave you exposed to big out-of-pocket costs in case of a car crash. Cutting back on nice-to-have coverages like rental car reimbursement can also be short-sighted, as I learned from getting in a bad car crash that put my family vehicle in the shop for a month.
How can you save money on car insurance without compromising on coverage? There’s a surprising new trick that more people might want to consider: telematics car insurance.
Let’s look at what telematics car insurance means, and how it can save you money.
Telematics car insurance: Personalized car insurance with the power of driving data
Traditional car insurance bases its premium costs on lots of impersonal, imprecise data. Your car insurance rates might be based on where you live, your age, and how much it costs to repair cars. If you live in a city that is at a higher risk for car crashes, your insurance premiums might be higher. Basically: Traditional car insurance penalizes you for other people’s bad driving. It’s like “guilt by association.” Just because you live in a certain city or area doesn’t mean you deserve to pay higher rates.
Telematics car insurance is a totally different approach. Instead of lumping you in with all the other unsafe or risky drivers, telematics lets you prove to your insurance company that you’re a good driver, and that you deserve discounts on car insurance. Telematics is personalized car insurance. It uses your driving data (shared with your insurance company with your permission) to reward you for safer driving.
Read more: check out our picks for the best car insurance companies
How telematics can save you big money on car insurance
Here’s how telematics works:
- Your insurance company asks you to agree to share your driving data.
- The company sends you a special mobile app or plug-in device that you install on your vehicle.
- Your insurance company starts tracking your driving data (with your permission).
- If your driving data shows that you’re a lower risk, you can get lower prices on car insurance.
Different insurance companies measure different driving habits and data. However, some of the typical driving data included in your telematics car insurance program might be:
- How much you drive: The fewer miles you drive, the lower your car insurance rates.
- How fast you accelerate and brake: Aggressive driving can put you at higher risk of crashes.
- Idling time: The more time you spend in dreaded stop-start traffic, the higher the risk is for fender benders.
- Nighttime driving: Staying off the roads during high-risk hours after midnight can lower your rates.
- How you use your phone: Some insurance companies check for distracted driving by monitoring if you use your phone for handheld activities while driving.
The savings from telematics car insurance can be significant. For example, some of the cheapest telematics car insurance plans offer discounts of up to 30% to 40%.
Best car insurance companies for telematics insurance
Here are a few of the best car insurance companies that offer telematics insurance programs, based on The Ascent’s research:
Nationwide’s telematics insurance program offers savings of up to 40% on car insurance, including an immediate 10% discount for signing up. Nationwide SmartRide® also gets high marks for its mobile app. This program is a limited time commitment, it calculates your discount fast (usually within 80 days of driving data), and it will not increase your premium. (Participating in some companies’ telematics programs can result in higher costs for car insurance, which is surely a disappointment to those drivers.)
State Farm Drive Safe & Save™
State Farm’s telematics program is called State Farm Drive Safe & Save™. This program gives you an immediate 10% premium reduction for signing up, and you can earn safe driving discounts for a total of up to 30% off. Like Nationwide, State Farm will not increase your premium as a result of your telematics driving data. State Farm’s iOS app is highly rated, although some Android users have complained about performance and accuracy issues.
Insurance companies aren’t the only companies getting into the telematics insurance world: Car companies are also offering insurance based on driving data. Ford is now offering Ford Insure, a unique telematics insurance program for Ford drivers. To get this special Ford telematics insurance, your Ford vehicle must be from model year 2020 or newer. Ford Insure is available in most states, and promises discounts of up to 40% off. It also offers savings if you bundle auto insurance with homeowners insurance or pet insurance.
Bottom line: Are you tired of seeing the price of your car insurance go up, and feeling like it’s out of your control? You should consider telematics car insurance. This is one surprising strategy you can try in 2024 to reduce your car insurance costs — and get empowered to be rewarded for safe driving. Telematics can reduce your car insurance premium without canceling your favorite essential coverages.
Our best car insurance companies for 2024
Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.
Clinton Mora is a reporter for Trending Insurance News. He has previously worked for the Forbes. As a contributor to Trending Insurance News, Clinton covers emerging a wide range of property and casualty insurance related stories.