With high inflation, you may be looking for ways to trim your budget. Purchasing smart car insurance — also known as usage-based insurance or telematics insurance — is one way an increasing number of drivers are cutting back on spending.
Smart car insurance may be for you if you have good driving habits. Many auto insurance companies offer drivers the option of policies based on data on how, when, and where you drive. It could result in cheaper auto insurance.
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How does smart car insurance work?
An insurance company bases the rate for car insurance on many factors: age, driving record, vehicle, and location. Telematics can provide insurers with data about your driving behavior: speed, acceleration, braking, time of day, and mileage.
These factors always figured into how insurance companies determined rates. But now, GPS, cellular, and Bluetooth technology in so-called smart cars, telematics devices you can install, and apps on your phone provide insurance companies with actual data to set rates. The more accurate data can lead to lower vehicle insurance premiums.
For example, if you purchase smart car insurance from a company, you may have to drive 30 days before there is any impact on your auto insurance rate. After that initial period, if the data shows you’re a safe driver, your safe-driving discount will kick in.
How does smart car insurance differ from traditional car insurance?
The coverage you receive from traditional car insurance and smart car insurance isn’t different. However, with smart car insurance, you can feel more assured your premium fits your driving.
Traditional car insurance uses aggregated statistics from driving records to determine rates, none of which might reflect your driving skills. Smart car insurance uses the actual data on how you drive. If you’re a good driver, that can help you. However, if you’re a bad driver, it could lead to higher rates, although some states don’t allow this.
6 types of coverage for smart cars
Smart cars have more technology than older cars, but the types of coverage haven’t changed. Here are six types of insurance coverage for your connected car.
1. Comprehensive insurance
If your vehicle is stolen or damaged by something unrelated to an accident, you can receive a payout from comprehensive coverage.
2. Collision insurance
Collision coverage will pay to repair or replace your connected car if it’s damaged in an accident, no matter who is at fault.
3. Liability insurance
There are two pieces to liability auto insurance: property damage and bodily injury. Bodily injury liability pays the medical costs for people in the other vehicle if you’re found at fault. Property damage liability pays to repair or replace the other vehicle or the driver’s personal property if you’re at fault.
4. Medical payments and personal injury protection
This coverage can take care of your medical bills and those of any passengers injured in an accident in your vehicle.
5. Uninsured/underinsurance motorist
If you’re in an accident with someone without insurance or too little car insurance, this coverage will pay for your car repairs.
6. Rideshare insurance
If you drive for a rideshare company like Lyft or Uber, many insurance companies require you to add rideshare insurance to your auto insurance policy. Rideshare insurance can give you coverage if you’re involved in an accident while waiting to pick up someone. It can pay if you’re liable for injuries or damages or to repair or replace your vehicle.
How much is smart car insurance?
Your savings on smart car insurance will vary from one insurance company to the next. The average annual savings is about $113. The savings range from a few dollars per year to almost $1,000, depending on the insurer.
How to save money on your smart car insurance
Here are some ways to save additional money on your smart car insurance.
Get multiple insurance quotes
Insurance companies don’t price their vehicle insurance the same way. Take the time to shop around and compare the same coverages and limits to help you see the best deal.
Bundle your insurance with other policies
Consider buying multiple policies from the same insurer. This could save you money on all your insurance needs. If you own a home or rent, you can bundle your car insurance with a homeowner or renters policy.
Maintain a good driving record
A lot of factors go into calculating a smart car insurance rate. But one that you control is your driving record. Avoiding accidents, speeding, or tickets could help keep down the cost of your car insurance.
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Go for a higher deductible amount
The deductible is the amount an insurer will take out your claim check. It’s typically $250, $500, $1,000, etc. Increasing your deductible might be a good way to reduce your insurance costs if you can afford to cover the costs of an accident.
Take advantage of discounts
Smart car insurance itself is a discount program from insurers. But there are also discounts on your premium. You could receive discounts for being a good or safe driver, parking in a garage, completing a defensive driver program, being affiliated with an employer or group, having anti-lock brakes, or installing anti-theft devices like alarms, tracking systems, or kill switches.
You can benefit from researching smart car insurance
Smart car insurance, or usage-based insurance, can save you money on your car insurance if the data insurers evaluate proves you’re a safe or good driver. However, the data an insurance company collects on you could show you as a higher risk.
You can benefit from understanding how, when, and where you drive and looking for other discounts to insure your smart car.
FAQ
Can I switch back to traditional car insurance if I don’t like smart car insurance?
Yes, you can switch to traditional car insurance whenever you want. Review your smart car insurance for cancellation fees and to understand your coverages. Then, you can contact your insurer to discuss the switch. Of course, your premium may change.
Will my policy be canceled if I opt out of smart car insurance?
Choosing not to take smart car insurance generally won’t lead to your policy being canceled. However, you must read the terms of your insurance agreement. Most states require 10 to 75 days for insurers to notify you of a cancellation.
What happens if my car is stolen or damaged with smart car insurance?
The data from your vehicle might help locate your stolen vehicle. If it’s not found and you have comprehensive coverage, file a claim if your car is stolen or damaged. Your insurer will pay you the actual cash value (current value) minus your deductible.
Can I track my driving habits myself with smart car insurance?
Several insurers use telematics — location, speed, and driving patterns and behavior — to lower the cost of your insurance for safe driving. Some insurers provide your driving data through their website or an app on your phone. You also can access the data from your smart car.
Can I file a claim easily with smart car insurance?
You can file a claim online, through a mobile app, or over the phone. You can even call your agent. Collect information at the scene, take photos, and request contact information from other drivers.
