Car insurance is an essential purchase. Not only is it required by law, but it also protects you in the event of an accident. However, because car insurance can be expensive, most policyholders are always looking for ways to lower their out-of-pocket costs. For drivers with certain characteristics, telematics offers the possibility of lower premiums, as well as other benefits.
Understanding Telematics
“Telematics” refers to the use of technology to track specific driving behaviors. It is common in industries that involve a fleet of drivers, such as delivery services and ridesharing companies. Within the industry of car insurance, however, telematics is not yet as common. Nonetheless, several major insurers are already using this technology, including Progressive, Safeco, Nationwide, and Travelers. In the future, experts predict that telematics will become more popular among insurance providers.
How it Works
If you have a policy based on telematics, you will need to keep a device in your vehicle to collect data about your driving habits. In most cases, telematics devices are plugged into the car’s onboard diagnostic port. All of the data will be collected automatically and transmitted to your car insurance company without any effort on your part. Data commonly collected by telematics devices includes:
- Braking habits
- Cornering habits
- Speeds drove
- Number of miles driven
- Times of the day spent driving
- Destinations
The car insurance company uses all of this information to determine how much risk you pose as a customer. Any factor that increases the chances of an accident, such as speeding or poor cornering, will lead to an increase in your premium. Alternatively, factors that lower the risk of an accident, such as good braking habits and safe speeds, will lower your premium.
In addition to using the data collected in premium calculations, insurance companies may also utilize this data when an accident occurs. In fact, telematics devices are often capable of notifying the insurance company immediately when you are involved in an accident. This saves you the trouble of making the first call, and it expedites the processing of any claims.
Advantages and Disadvantages of Telematics
The use of telematics offers both advantages and disadvantages for policyholders. Advantages of telematics include:
- Potential for lower premiums, especially for safe drivers and drivers who don’t spend much time on the road.
- An incentive to drive safely, which leads to fewer accidents.
- Faster, more accurate processing of insurance claims.
For drivers who spend a lot of time on the road, travel at high speeds, or don’t drive as safely, telematics may lead to increased premiums.
Should I Buy a Policy with Telematics?
Not all insurance policies come with telematics. Because not all drivers will benefit from the use of this technology, it is important to explore your options carefully to determine whether a policy with telematics would be beneficial for you. The best way to ensure that you are making the right choice is to work closely with an insurance agent who understands this topic and can thoroughly assess your situation. To learn more about telematics or to explore your other insurance options, contact Carrigan Insurance today.
