What is the best way to select a telematics program

Before enrolling in a telematics program, you should consider your driving habits carefully.

For example, if you're a college student or remote worker who rarely drives, you might want to look into a pay-per-mile program that calculates your rate based on how many miles you drive. This means that your bill will change on a monthly basis. If you must drive frequently, a pay-as-you-drive program that rewards safe driving habits rather than miles driven may be your best option.

Whatever program you select, you must be comfortable with your insurer tracking your driving habits.

In general, insurers keep an eye out for things like:

• The number of miles you drive.
• You're driving at a certain time of day.
• Braking forcefully.
• Accelerating and speeding up.
• Use of a cell phone (if tracking is done with an app).

How telematics insurance works

When you enroll in a telematics program, your insurer will begin tracking your driving habits via a mobile app or a device that plugs into your vehicle's diagnostic port.

What happens next is determined by your program. Based on the information gathered, your insurer will either provide you with a new car insurance rate or a discount off your current base rate.

Your updated rate may be less expensive than what you were previously paying, but this is not always the case. If you are deemed an unsafe driver, you may end up paying more.

With discount programs, your driving behavior has no direct impact on your rate. However, it can influence how much of a discount you receive. The greater the discount, the safer you drive.

How much you can save

Savings range from 5% to 40% depending on the company. Some businesses will even give you a discount just for signing up.

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

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

According to Lajdziak, many telematics programs also provide other benefits such as safe driving tips and alerts when your car's oil needs to be changed.

Should you try telematics insurance?

Consider enrolling in a telematics program if you:

• Do not drive between the hours of 12 a.m. and 4 a.m.
• Avoid hard braking and excessive speeding.
• Only drive on rare occasions.
• Don't text or talk on the phone while driving.

It is critical to follow all of the above guidelines in order to get the best rate. For example, even if you don't drive a lot of miles overall, late-night driving can reduce the size of your discount.

According to Christian Underwood, personal lines agent at Byars Wright, an independent insurance agency in central Alabama, the following groups may benefit from switching.

Homeschooled teens and remote students. Teen drivers typically pay more for car insurance than college students. You probably drive less than your peers if you are homeschooled or learning remotely, and you could benefit from using a telematics program.

Retirees, stay-at-home parents, and remote workers. Members of these groups generally rack up fewer miles and spend less time travelling during the busiest times of the day, whether they are caring for children or working a 9 to 5 at home.

According to Underwood, this can make a significant difference in how your insurer rates your driving. “There are more opportunities for risk if there is heavier traffic,” he says. “When it's a busy time of day, that can have a big impact on ratings.”

People who have a short commute. Even if you only drive a few miles to work, telematics may allow you to save money.

Drivers who are primarily reliant on other modes of transportation. If you walk, bike, or take public transportation, you'll probably get less mileage than the average driver.

Still hesitant to try telematics insurance? Most businesses allow you to opt out after a certain period of time. While you will lose your sign-up discount, your rate will generally not be affected. Before you join, check with your insurer to find out how to cancel.