How does telematics insurance work?

For telematics insurance to work, insurers must gather data on your driving. This can be done through a black box or mobile app. As you drive, the tool will collect and transmit data to your insurer, be it data about how many miles you’ve driven or how you drive, which they will then use to calculate your monthly rates.

What does telematics mean?

Telematics is a term used to describe the transmission of data collected from remote objects. This includes cars or even whole fleets. Insurers use telematics to reward drivers who drive less or drive safely with reduced auto insurance premiums.

What are the advantages of telematics insurance?

Telematics insurance can reward infrequent drivers and those with good driving habits for their usage with lower premiums. For instance, mileage-based insurance only charges drivers based on how many miles they drive, while behavior-based insurance grants discounts if a driver is found to practice safe driving skills. Insurance providers gather that these drivers will file fewer claims and be less of a risk on the road.

Telematics Insurance: Usage-Based Auto Coverage

Name: Telematics Insurance: Usage-Based Auto Coverage
Item: Telematics Insurance: Usage-Based Auto Coverage
Author: Nathan Paulus

Telematics insurance uses your driving data, be it your mileage or driving behavior, to increase or decrease your monthly premiums.

ByNathan Paulus

Edited byAliha Strange

ByNathan Paulus

Edited byAliha Strange

Updated: March 1, 2024

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About Nathan Paulus

Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.