Mileage And Auto Insurance: How Your Driving Habits Impact Your Rates

Expected annual mileage can have an impact on auto insurance rates. Insurance companies often consider annual mileage as one of the factors when determining the cost of your car insurance policy. The more you drive, the higher the risk of being involved in accidents, which can result in higher insurance premiums. On the other hand, driving fewer miles can lead to lower insurance costs.

How is annual mileage calculated?

There are several ways to calculate your annual mileage. One way is to take a look at the mileage currently on your car’s odometer. If you know how old your car is, divide that mileage by the age of the car. If you don’t know how old your car is, you can find this information on the driver’s door jamb.

Another way is to base your information on the previous 12-month period and make any adjustments if you think it will change. If your driving pattern is quite consistent, you can reset your vehicle’s odometer/trip meter to zero and record your actual mileage for the next week or month to use as a guide.

You can also refer to your vehicle’s service history, where the service coordinator typically records your mileage when you visit the shop. Additionally, you can check your MOT certificate, which shows the total mileage at the time of getting your MOT, as well as your mileage history over the last three years.

To estimate your annual mileage, you can also track your mileage during an average month and multiply that by 12. Alternatively, you can divide the number of miles you've put on your car since you bought it by the number of months you've owned your car to arrive at an average monthly mileage. Multiply that number by 12 to get an annual mileage.

When calculating your annual mileage, it is important to be as accurate as possible. This is because your annual mileage can affect your car insurance rate. Specifically, the less you drive, the less you may be able to pay for car insurance.

How does annual mileage impact insurance rates?

The number of miles you drive annually impacts your insurance rates because the more time you spend on the road, the higher the chance of getting into an accident. Insurance companies use your annual mileage to determine your risk level and set your rates. The more miles you drive, the higher your insurance rates are likely to be.

When you apply for coverage, you will be asked to estimate your annual mileage. Insurance companies understand that you cannot predict the exact number of miles you will drive in a year, so they are willing to accept an estimate. It is important to be as accurate as possible when supplying this information, as underestimating your mileage could lead to higher premiums or claim disputes, while overestimating may result in paying more for your premium than necessary.

To calculate your estimated annual mileage, you can refer to your vehicle's service history, which typically records your mileage during each service. You can also reset your trip meter to zero and record your mileage over a week or a month, then multiply that by 52 or 12, respectively, to get an annual estimate.

Insurance companies often categorise annual mileage into three categories: low, average, and high. Low mileage is typically considered anything under 7,500 miles per year, or less than 10 miles per day, while average mileage falls between 7,500 and 15,000 miles annually, or 20 miles per day. High mileage is usually considered anything over 15,000 miles per year or 40 miles per day.

If you drive less than the average number of miles, you may qualify for low-mileage discounts or pay-as-you-go insurance, which can help lower your insurance rates. On the other hand, if your annual mileage increases during your policy term, your rates may also increase, and you should inform your insurance company of this change.

How do insurance companies verify mileage?

Insurance companies use a variety of methods to verify a driver's annual mileage. When applying for insurance, individuals are usually asked to self-report their mileage by providing an odometer reading or an estimate of their annual mileage. Some insurers also use telematics devices or smartphone apps to track driving habits and calculate mileage accurately. These devices are often plugged into the car or are already built into the car as a black box. Telematics devices can also be used to track mileage for pay-per-mile insurance policies, where the premium is based on usage.

In addition to self-reporting and telematics, insurance companies may also obtain mileage information from third-party vendors. For example, dealerships and oil change companies may sell non-anonymized mileage data to insurance companies, or this information may be obtained from a third party during an annual safety inspection. Service history records and MOT records, which include mileage information, can also be used to verify a vehicle's mileage. While insurance companies typically rely on odometer readings, they may also refer to records kept by third parties to estimate a vehicle's average mileage.

While it may be tempting to underestimate your mileage to obtain a lower premium, it is important to provide accurate information to your insurance company. Insurance policies are based on the estimated risk of a claim, and providing false information could lead to higher premiums or even policy cancellation if discrepancies are discovered. For example, insurance companies may check the odometer reading after an accident or refer to MOT records, which could reveal inconsistencies in the reported mileage. Therefore, it is crucial to be honest and accurate when reporting your annual mileage to your insurance provider.

What is considered low mileage?

The definition of low mileage varies depending on the source and the insurance provider. Generally, low mileage is considered to be between 7,500 and 15,000 miles per year. However, some sources suggest that driving less than the average of 13,000 to 13,500 miles per year can be considered low mileage. This equates to under 10,000 miles annually.

Insurance companies often use different mileage thresholds to determine low mileage. These can include ranges such as 0-7,500 miles, 7,501-10,000 miles, or 10,001-15,000 miles per year. It's important to note that these thresholds may differ among insurance providers, so it's advisable to check with your specific insurance company for their definitions and guidelines.

When it comes to used cars, the average mileage is around 10,000 to 12,000 miles per year. Older cars are likely to have higher overall mileage, even if their yearly mileage is considered low relative to their age.

Low-mileage vehicles are generally more desirable as they tend to have less wear and tear and are presumed to have a longer lifespan. However, it's important to consider other factors besides mileage, such as the car's condition, service history, and how it has been maintained.

How can low mileage drivers save on insurance?

The number of miles you drive annually is a significant factor in determining your car insurance premium. The more you drive, the higher your premium is likely to be. This is because the more time you spend on the road, the higher the chance of getting into an accident and needing to make a claim.

If you drive infrequently, you can save on insurance by availing of a low-mileage discount or pay-as-you-go insurance.

How to calculate your annual mileage

There are several ways to calculate your annual mileage:

• Check your annual MOT certificate, which will show the miles you drove the previous year, and estimate mileage for the coming year.
• Check your car's service record. Mileage is noted in your logbook every time your car has its annual service.
• When you take out a new car insurance policy, make a note of the mileage on your car's dashboard so you can look back and see how many miles you've driven when your policy is up for renewal.
• Calculate how many miles you drive each day and add them all up.
• Check your vehicle’s service history, where the service coordinator typically records your mileage when you visit the shop.
• Reset your vehicle’s odometer/trip meter to zero and record your actual mileage for the next week or month and use that as a guide.
• Divide the number of miles you've put on your car since you bought it by the number of months you've owned it to get an average monthly mileage. Multiply that number by 12 to get an annual mileage.

Low-mileage discounts

Insurance companies offer low-mileage discounts to drivers who drive fewer miles than the average driver. The threshold for what counts as a "low-mileage" driver varies by company and state. Some companies offer discounts to drivers who drive under 12,000 miles per year, while others only offer discounts to those who drive under 10,000, 7,500, or even 5,000 miles per year.

Specialist policies for low-mileage drivers

Some insurance providers offer specific low-mileage insurance policies, such as discounted policies for drivers who drive less than 25 miles per day. There are also classic car insurance policies for drivers who only use their vehicles during the summer months.

Pay-per-mile insurance

Pay-per-mile insurance is another option for low-mileage drivers. With this type of insurance, you pay a base daily rate for every day you drive, plus a per-mile charge for each mile driven. A device placed in your vehicle tracks your mileage, which is used to calculate your monthly premium.

Telematics insurance

Telematics insurance involves installing a small black box in your car (or downloading an app to your phone) that monitors your driving and relays the information back to your insurance provider. If you drive safely and within the low-mileage threshold, your provider may reward you with a reduced premium.

Frequently asked questions