Jeffrey Wade
Do Auto Insurance Companies Discount for Low Annual Mileage?
Auto insurance companies use various methods to calculate premiums, and one factor that can significantly impact costs is a driver's annual mileage. It is well understood that the more time spent on the road, the higher the chances of an accident, so it stands to reason that low-mileage drivers should benefit from reduced rates. This is indeed the case, and many insurance companies now offer discounts for those who drive less than a certain number of miles each year.
How Do Low-Mileage Discounts Work?
The definition of a low-mileage driver varies across insurance providers, but it generally refers to those who drive under a specific number of miles annually. Most insurance companies consider someone who drives between 0 and 7,500 miles per year as a low-mileage driver. However, this threshold can differ, with some companies setting the bar at 10,000 miles.
Drivers who fall into this category are seen as less likely to file an insurance claim due to their reduced time on the road, and so insurance companies are willing to offer discounted rates to attract these lower-risk customers.
How Much Can You Save with a Low-Mileage Discount?
The amount you can save with a low-mileage discount varies depending on the insurance company and your specific policy. Discounts typically range from 5% to 30% off the base premium. For example, State Farm offers a low-mileage discount for drivers travelling less than 7,500 miles annually, which can save customers up to 30%.
Other companies, such as Metromile, a pay-per-mile insurance provider, claim that their customers who drive 2,500 miles per year save about $947 compared to standard insurance. Similarly, Allstate's pay-per-mile program, Milewise, is said to save low-mileage drivers around 50% compared to standard policies.
How to Get a Low-Mileage Discount
If you believe you qualify as a low-mileage driver, the first step is to find out your insurer's eligibility requirements, as each company sets its own maximum mileage threshold. Once you've confirmed your eligibility, you'll need to contact your insurer and provide them with your current odometer reading. They may also require proof of your mileage, such as service paperwork or a photo of your odometer.
It's important to note that insurance companies may periodically request updated mileage information to maintain the discount, and failing to stay below the mileage limit will result in losing the discount.
Other Ways to Save on Low-Mileage Insurance
In addition to low-mileage discounts, there are other options for low-mileage drivers to save on their car insurance. Some insurance companies offer pay-per-mile insurance, where your premium is calculated based on a base rate plus a mileage rate for every mile you drive. This can be a great option if you don't drive much and want your insurance costs to reflect your usage accurately.
Another alternative is usage-based insurance, where a telematics device or smartphone app tracks your driving habits, including mileage, braking, speeding, cornering, time of day, and phone usage. This data is then used to calculate your insurance rate, with safe and low-mileage drivers often benefiting from reduced premiums.
Final Thoughts
If you're a low-mileage driver, it's worth exploring the various options available to reduce your car insurance costs. Whether it's through a low-mileage discount, pay-per-mile insurance, or usage-based insurance, there are opportunities to save money on your premiums. Contacting insurance companies and comparing quotes can help you find the best option for your specific situation.
| Characteristics | Values |
|---|---|
| Average annual mileage for low-mileage drivers | 6,000-7,500 miles |
| Average annual mileage for drivers | 12,000-13,500 miles |
| Average insurance cost for low-mileage drivers | $1,973 |
| Average insurance cost for drivers | $2,068 |
| Average insurance cost savings for low-mileage drivers | $95 |
| Companies offering low-mileage discounts | State Farm, Safeco, Geico, USAA, American Family, Farm Bureau, PEMCO, Erie, Auto-Owners, Nationwide, Liberty Mutual, Progressive, Allstate |
| Companies offering pay-per-mile insurance | Metromile, Root, Allstate, Nationwide, Mile Auto, Lemonade, Noblr |
| Companies offering usage-based insurance | USAA, American Family, State Farm, Progressive, Nationwide, Liberty Mutual, Safeco, The Hartford, Travelers |
What You'll Learn
Low-mileage discounts
Qualifying for a Low-Mileage Discount
Not all insurance companies offer low-mileage discounts, and those that do will have specific requirements that must be met. Most companies set an annual mileage threshold that you must fall under to qualify for the discount. This threshold can vary, but it is commonly set at 7,500 miles or 8,000 miles per year. Some companies, like State Farm, may also periodically request updates on your vehicle's mileage to ensure you are still eligible for the discount.
To qualify for a low-mileage discount, you will need to provide proof of your annual mileage. This can be done through odometer readings, verification from a third party, or participation in a safe driving program that tracks your mileage.
Insurance Companies Offering Low-Mileage Discounts
Several insurance companies offer low-mileage discounts, including:
- State Farm
- Safeco
- Geico
- USAA
- American Family Insurance
- Farm Bureau
- PEMCO
- Auto-Owners Insurance
- Nationwide
- Liberty Mutual
- Progressive
- Allstate
- Milewise
- Erie Insurance
- Farmers
Other Ways to Save on Low-Mileage Auto Insurance
In addition to low-mileage discounts, there are other ways to save on your auto insurance if you are a low-mileage driver:
- Pay-per-mile insurance: This type of insurance calculates your premium based on a base rate plus a per-mile rate, so the less you drive, the lower your premium will be.
- Usage-based insurance: These programs use a telematics device or app to track your driving habits, including mileage, safe driving behaviour, and other factors. Safe driving and low mileage can lead to discounts on your insurance.
- Compare insurance companies: Shop around and compare quotes from different insurance companies, as rates and discounts can vary significantly.
By taking advantage of low-mileage discounts and exploring other insurance options, low-mileage drivers can find ways to reduce their auto insurance costs.
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Pay-per-mile insurance
Most insurers track mileage using a device that plugs into the car's OBD port under the dashboard. Most cars from 1996 and later can be used with the plug-in device, though some hybrids and electric vehicles may not be compatible.
Most pay-per-mile companies also have a mileage cap, specifying the maximum number of miles policyholders will be charged for in one day. For instance, if you drive 250 miles in one day but your mileage cap is 150 miles, you will only be charged for the first 150 miles of your trip.
In addition, some pay-per-mile insurance policies often include features that may help you save more on your premiums, such as feedback on your driving habits and tips on ways to improve.
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Usage-based insurance
UBI is offered by some auto insurance companies that track your driving and could result in cheaper car insurance—if your driving scores well. UBI programs generally measure speeding, acceleration, harsh braking, along with mileage and the time of day you drive. You get a driving score and often tips for improving your score. The better you drive, the better your auto insurance rates.
UBI programs are becoming increasingly popular, with a TransUnion survey finding that 40% of respondents were offered a telematics program, up from 32% in November 2021. The percentage of those who opted into a telematics program also rose from 49% to 65%.
There are two basic types of UBI programs:
- Driving-based: Your driving habits are measured based on factors like how hard and how often you brake, how quickly you accelerate, and the time of day you drive.
- Mileage-based: Your insurer only measures how many miles you drive.
Both programs rely on telematics to gather information about your driving behaviour. Telematics can transmit data from moving vehicles and share it with an information centre.
While UBI can lead to cheaper car insurance rates, it doesn't work out that way for more than half of drivers who opt into telematics programs. According to the TransUnion survey, car insurance rates decreased for only 48% of those enrolled, stayed the same for 30%, increased for 18%, and 4% said they didn't know if their rates were affected.
Despite this, the majority of drivers who enrolled in a telematics program were satisfied with their choice, with nearly two-thirds (64%) saying they were "very satisfied" or "extremely satisfied".
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Telematics devices
Some insurance companies offer telematics programs that provide an initial discount for signing up, followed by additional rewards or discounts based on good driving behaviour. For example, Progressive's Snapshot program offers an automatic discount in most states, followed by a personalized rate after the first policy period. Similarly, Allstate's Drivewise program provides a 3% cashback reward upon signing up, with further savings unlocked through good driving habits.
Telematics programs can be beneficial for low-mileage drivers, as they often track mileage and offer discounts for those who drive fewer miles than average. For instance, State Farm's Drive Safe & Save program advertises savings of up to 50% and focuses on low-mileage driving. However, it's important to note that not all telematics programs offer discounts for low mileage, and some may even increase your base rate if you're considered a "bad driver" or drive above-average miles.
When considering a telematics program, it's essential to review the specific details of the program and understand the criteria for earning discounts. Additionally, keep in mind that telematics programs may not be available in all states, so it's worth checking the availability in your region.
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Mileage-based policies
With mileage-based policies, your auto insurance rate is determined by how many miles you drive. This is different from a low-mileage discount, which offers a percentage off a traditional policy. Mileage-based policies usually consist of a base rate, which is calculated using factors such as age, driving history, and vehicle type, and a variable rate based on the number of miles driven. Some companies, like Metromile, charge a base rate and a per-mile rate, while others, like Nationwide's SmartMiles, include a base rate and a cost-per-mile rate that only applies to the first 250 miles per day. This means that any additional miles driven after the first 250 miles in a day are free of charge.
There are a few ways that insurance companies can track your mileage. Some companies use telematics, which is technology that tracks your mileage through an app or a device plugged into your car's diagnostic port. For example, Metromile, Mile Auto, and Nationwide SmartMiles use a device that plugs into your car, while Allstate Milewise and Noblr use a mobile app. If you're concerned about privacy and data sharing, Mile Auto offers a unique approach where they simply ask you to send a photo of your odometer each month instead of using a tracking device or app.
When considering a mileage-based policy, it's important to keep in mind that the availability of these policies may vary by state, and not all insurance companies offer them. Additionally, the specific mileage thresholds and rates will differ between companies. Be sure to shop around, compare rates, and read the fine print to understand the details of the policy before making a decision.
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Frequently asked questions
Most insurance providers consider someone who drives between 0 and 7,500 miles per year a "low-mileage driver". However, the definition of a low-mileage driver varies across insurance providers. For example, USAA considers motorists who drive 6,000 miles or fewer per year as low-mileage drivers, while Auto-Owners Insurance sets the threshold at fewer than 10,000 miles per year.
To get a low-mileage discount, you will need to meet your insurer's eligibility requirements, typically by driving below a certain mileage per year. The specific mileage threshold varies by insurer, but it is commonly set at 7,500 miles per year. You will need to provide your current odometer reading to your insurer and monitor your mileage throughout the year to ensure you stay under the limit.
According to research, USAA and State Farm offer the cheapest insurance coverage for low-mileage drivers. Other insurance companies that provide low-mileage discounts include Safeco, Geico, and American Family.
The potential savings with a low-mileage discount can vary depending on the insurance company and your circumstances. Discounts typically range from 5% to 30% off the base premium.
