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How Your Driving Habits Can Lower Your Insurance Bill
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How Your Driving Habits Can Lower Your Insurance Bill

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People who rarely drive may be able to save on car insurance with a pay-per-mile policy.

If you're a safe driver or working from home and on the road less often, you may be able to find cheap car insurance rates by joining a telematics program. Offered by multiple insurers, these programs use tracking devices or apps to monitor your driving behavior and reward safe habits.

How to choose a telematics program

Before you sign up for a telematics program, you’ll want to think carefully about your driving habits.

For example, if you’re a college student or remote worker who doesn’t drive often, you may want to consider a pay-per-mile program, which calculates your rate based on how many miles you drive. This means your bill will change every month. If you still have to be on the road often, a pay-as-you-drive program, which rewards safe driving habits rather than focusing on miles driven, might be your best option.

No matter the program you choose, you’ll have to be comfortable with your insurer tracking your driving habits.

In general, insurers monitor behavior such as:

  • How many miles you drive.
  • The time of day you’re driving.
  • Hard braking.
  • Speeding and accelerating.
  • Cell phone use (if tracking is done with an app).

How telematics insurance works

After you sign up for a telematics program, your insurer will start tracking your driving through a mobile app or a device that plugs into your car’s diagnostic port.

What happens next depends on your program. Based on the data collected, your insurer will give you either a new car insurance rate or a discount off your current base rate.

Your updated rate may be cheaper than what you were originally paying, but not always.  You may end up paying more if you’re deemed an unsafe driver.

With discount programs, your rate isn’t directly affected by your driving behavior. However, it can make an impact on how much of a discount you earn. The safer you drive, the bigger the discount.

How much you can save

Savings vary by company, ranging from 5% to 40%. Some companies even give discounts just for signing up.

Still, the biggest benefit isn’t necessarily lower rates, but more transparency into how your insurance is priced, says Robert Lajdziak, senior consultant for insurance intelligence at J.D. Power, a data and analytics company.

“Drivers that are enrolled are more satisfied with the price they pay, even if they don’t get a discount,” Lajdziak says, because participants can see how their driving habits directly affect their insurance bill.

Beyond that, many telematics programs offer other benefits like safe driving tips and alerts when your car needs its next oil change, according to Lajdziak.

Should you try telematics insurance?

Consider a telematics program if you:

  • Don’t drive between 12 a.m. and 4 a.m.
  • Avoid hard braking and speeding.
  • Drive only occasionally.
  • Don’t talk or text while driving.

Following all of the guidelines above is crucial to get the lowest rate. For example, even if you don’t drive many miles overall, late-night driving could negatively impact the size of your discount.

Below are other groups that might save by making the switch, says Christian Underwood, personal lines agent at Byars Wright, an independent insurance agency in central Alabama.

Homeschooled teens and remote students. Teen drivers generally have even higher car insurance rates than college students. If you’re homeschooled or learning remotely, you probably drive less than your peers and could benefit from using a telematics program.

Remote workers, stay-at-home parents and retirees. Whether they’re looking after kids or working a 9 to 5 at home, members of these groups generally rack up fewer miles and spend less time traveling during the busiest parts of the day.

This can make a big difference in how your insurer rates your driving, according to Underwood. “[If] there's heavier traffic, there's more opportunities for risk,” he says. “When it's a heavily congested time of day, that can really impact ratings.”

People with short commutes. If you drive only a few miles to the office, you may still be able to cut costs with telematics.

Drivers who primarily use other modes of transportation. You’ll likely have less mileage than the average driver if you usually get around by walking, biking or using mass transit.

Still nervous about trying telematics insurance? Most companies let you opt out after a certain amount of time. While you’ll lose your sign-up discount, you generally won’t see any negative impact on your rate. Before joining, check with your insurer to clarify how to withdraw.

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