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When you dive into your finances and look for available ways to cut down on monthly expenses, you’ll stumble across your insurance premiums at some point. Your bill may be quite high if you have a teenager on your policy or haven’t exactly been a model citizen about road rules. However, you may be able to obtain a lower rate using telematics. If you don’t know what this term refers to, read on to find out and discount your car insurance.

How do insurers choose your insurance rate?

A car in need of insurance that hopefully has a way to discount your car insurance
Car accident | Getty Images

Before getting into telematics, it’s important to understand that insurers each have their way of determining the rate you should pay. Each insurer looks at different variables, such as the type of car you have, your driving history, where you live, your age, and your coverage type, among others. Fundamentally, insurers want to assess your risk of filing a claim, which means your risk of getting into an accident and how much you might have to pay for damages.

If you drive a more expensive and sophisticated car, you’ll pay a higher rate because it will cost more to repair when damaged. And if you live in a densely populated area, your chances of getting into an accident increase, no matter how safely you drive.

That’s because there are simply more cars on the road and potentially other factors like narrow streets, bike lanes, and double-parked cars that can be difficult to navigate. All other things being equal, you’ll likely pay more for insurance coverage for a car registered in midtown Manhattan than in Woodstock, New York.

You’ll also pay more if you have a poor driving history. You will likely pay more if you lost points off your license for things like speeding or ignoring traffic signs. Those with a DUI will definitely pay more. Insurers see these as red flags that you may be a reckless driver and, therefore, more likely to get into an accident. Hence, your insurance premium will go up.

How can telematics discount your car insurance?

Telematics refers to a field of automotive technology primarily concerning vehicular GPS systems, sensory systems, and wireless communications. When discussing these systems within a road vehicle, the term vehicle telematics is typically used. Among the most common applications are built-in vehicle navigation, semi-autonomous driving systems, and various advanced safety systems, like an automatic warning and braking systems.

Automakers have been using telematics technology to develop systems that monitor vehicles in motion. They have also been developing increasingly sophisticated sensors that detect a vehicle approaching road signs. Insurers have taken a keen interest in these developments and designed systems that enable them to track a driver’s performance. When you sign up for your insurance company’s telematics program, they’ll install a device that integrates with your vehicle’s technology, allowing them to monitor how well you’re driving, following road rules, and obeying speed limits.

The better you drive, the less you’ll pay. But if you are speeding or driving recklessly in other ways, that information will be reported back to your insurer in real-time. You’ll then start to see a hike in your premiums, as your insurance company will have evidence that you are at risk for an accident. Telematics is a double-edged sword, but if you are a prudent driver, you can reduce your premium costs by signing up.

Other ways you can discount your car insurance

Telematics is not the only auto insurance cost savings game in town. As per Allstate, there are several other ways you can lower your premium – without the risk of inadvertently driving it up. One way you can do so is by bundling policies. If your auto insurer also offers home insurance or life insurance, move your business to them when it’s feasible. Many insurance companies will provide discounts if you have multiple policies.

You can also save money by keeping your mileage low. Some companies will reduce premiums if you drive fewer miles each year than the average for the area in which you reside. Others may calculate your premiums based on your mileage. The less you drive, the less risk you are of getting into an accident and filing a claim. So drive less to save on your insurance – and gas.

In some cases, you may be able to get a discount if you have an anti-theft device installed in your vehicle. Insurers also look at auto thefts in your area when determining your rate. Reducing the risk of filing a claim for a stolen car can help get your rates lowered. And in many cases, you may get a discount for renewing your old policy early in pre-paying your premium.


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