Can Telematics Programs for Car Insurance Really Save You Money?

Everyone wants the cheapest rates for car insurance that they can get, which often means looking into possible discounts from their insurance company. Many insurers offer savings for participating in a telematics program that tracks your driving and rewards you for safe habits. While these usage-based insurance programs can help you save money on car insurance, they can also backfire and result in higher premiums.

Personally, I'm not willing to take the risk of using a telematics program because I'm sure I'd get penalized for my tendency to drive a little over the speed limit. However, the program could be beneficial for some, especially parents with teen drivers who want to lower their premiums and possibly teach their kids safe driving habits. A former colleague used a telematics program to monitor her teenage son's driving. I remember her giving him the third degree over the phone when the program detected one too many people in his car.

You'll want to carefully consider your driving history and habits and understand what these programs track to ensure signing up for potential savings is worth the risk.

What is a telematics program?

A telematics program is a type of car insurance that uses technology to track your driving habits and help your insurer determine how much risk you pose behind the wheel. By practicing safe driving, you could earn a discount on your car insurance premiums or other rewards, potentially saving you a significant amount of money.

Telematics programs, like Progressive's Snapshot or GEICO's DriveEasy, are usually voluntary. When you sign up, your insurer may ask you to download a smartphone app, install a plug-in device, or use a built-in system already integrated into your vehicle. These tools collect real-time data about how, when, and where you drive. Several key habits that telematics programs often monitor include:

How often you brake hard or accelerate quickly
How fast you drive
How many miles you drive
How long you stay on the road
Whether you use your phone while driving

Your insurance company then uses the data the telematics program collects to give you a score on how safely you drive. A high safety score may qualify you for a discount when you renew your policy, but a low score may lead to an increase in your car insurance premiums.

How participating can save you money

Some car insurance companies offer incentives for participation in their telematics programs. Several insurers provide a car insurance discount just for enrolling. Most insurers also give drivers with high safety scores discounts on their premiums when it is time to renew their policies.

A Consumer Reports survey found that drivers using telematics saved a median amount of $120 per year on their car insurance policies. Discounts earned for safe driving typically range from about 10% to 40% a year.

Some car insurance companies, like Erie Insurance, will reward your safe driving habits with gift cards or charitable donations rather than policy discounts.

Which companies offer telematics programs for car insurance discounts?

Some of the best car insurance companies offering telematics programs include Allstate, State Farm, Geico, Progressive, and Liberty Mutual. These programs can typically save you up to 30% or 40% on your car insurance premiums at renewal, and the enrollment discounts are usually about 10%.

However, your actual savings can vary based on your driving habits and the specific program. Some programs can also lead to premium increases and may not be available in your state.

Telematics program	Tracking method(s)	Available discounts	May increase premiums?
Allstate Drivewise	Mobile app	Participation discount for enrollment Performance-based premium savings at renewal	Yes
Farmers Signal	Mobile app	Premium discount at renewal Rewards of up to $100 for driving scores of 80% or better	Yes
Geico DriveEasy	Mobile app	Premium discount at renewal	Yes
Liberty Mutual RightTrack	Mobile app	10% enrollment discount Up to 30% premium discount at renewal	Yes
Nationwide SmartRide	Mobile app or plug-in device	15% enrollment discount Up to 40% premium discount at renewal	No
Progressive Snapshot	Mobile app or plug-in device	Participation discount Performance-based premium discount at renewal	Yes
State Farm Drive Safe & Save	Mobile app	Up to 30% premium discount at renewal 10% participation discount	No

Does telematics car insurance have risks?

While telematics car insurance may sound like a good way to save money, it does come with risks. One of the biggest concerns is the possibility that your insurance rates will increase because your driving behavior is flagged as risky. Some insurers, like Nationwide and State Farm, won't increase insurance rates for drivers with low scores, but many do.

Other drawbacks of participating in telematics programs include:

Privacy concerns: Telematic devices and apps track detailed data like your location, the time of day you drive, and your phone use while driving. You might not feel comfortable providing this data to your insurance company.
Inaccurate tracking: The technology might misinterpret certain actions or penalize you for another driver's behavior if they use your car. This could lead to premium increases even if you're usually driving safely.
Limited availability: Some states restrict or regulate telematics programs, primarily due to privacy concerns. Depending on where you live, you might have fewer insurance companies to choose from or not have access to telematics at all.
Fading discounts: While insurers may say you can save up to 30-40% with their telematics programs, that isn't always the case. According to the Consumer Federation of America (CFA), the typical savings is closer to 10%.

Before signing up for a telematics program, weigh these risks against the potential to save money on car insurance. Also, consider whether you practice enough safe driving habits to ensure you're eligible for a discount.

How to choose the right telematics program

Not all telematics insurance programs are alike. Before jumping in, you should take a minute to think about whether the program fits your driving style and if you're comfortable with the monitoring requirements. If you're a safe, consistent driver who doesn't mind sharing some data in exchange for possible savings, it could be a smart move.

Here are some tips to consider when exploring insurers that offer telematics programs.

Compare potential discounts: Look at the maximum savings each insurer offers and read the fine print on how you can earn and maintain those discounts.
Check how the insurer collects data: Find out whether the program uses a smartphone app, plug-in device, or built-in vehicle system. Choose the method you're most comfortable with.
Ask if rates can go up: Not all telematics programs guarantee savings. Understand whether your premiums could increase based on your driving behavior.
Research customer experiences: Read reviews from other drivers to find out the good and bad things they have to say about the program you're considering.
Review the privacy policy: Make sure you know exactly what data the insurer collects, how the company will use it, and whether it shares data with third parties. Also, check the rights you have as a participant, including whether you can ask the insurer to delete your data.

FAQs

Is telematics worth it?

Yes, telematics can be worth it if you are usually a pretty good driver who stays within the speed limit and doesn't try to multitask with your phone while driving. That being said, if you have a lead foot or tailgate often (causing you to slam on the brakes), there's a good chance your rates will increase — not decrease — from signing up for a telematics program.

How much can you save with telematic car insurance?

Insurers that offer telematic car insurance claim that drivers can save up to 30-40% by participating in the program, and some even offer a 10% discount for enrolling. However, the CFA estimated that the typical savings is more like 10%. Shop around to find the best rates and compare telematics discounts from multiple insurers.

Can you try telematics insurance before signing up?

Yes, you can try telematics insurance before fully committing. Some insurers offer a trial or evaluation period that enables you to test the program without immediately affecting your rates.

For example, Progressive allows you to opt out of its Snapshot program anytime. By opting out, you forgo any enrollment discount you received, and you may be subject to a surcharge if you opt out more than 45 days after you enroll.

Can you opt out of telematics?

Yes, you can opt out of telematics. It's a voluntary program, so you have the choice to participate or not. If you've already enrolled, check your insurer's policy for leaving the program and keep in mind you could lose your enrollment discount.

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Bottom line

Telematics car insurance can offer real savings for safe drivers who are comfortable sharing their driving data, but it's not without trade-offs. Privacy concerns and the risk of rate increases could outweigh the potential benefits, depending on your driving habits and comfort level.

Before signing up, compare programs, understand the fine print, and evaluate how your driving behavior might be scored. If you are confident in your driving habits and like the idea of paying based on how you drive, a telematics program could be a smart way to cut costs. It's also worth it to research the cheapest car insurance companies and compare quotes.

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