Mileage Impact On Insurance: Does More Driving Mean Higher Premiums?

Mileage is a key factor that insurance companies consider when determining car insurance rates and setting insurance premiums. The more miles a driver spends on the road, the higher the risk of being involved in a car crash, and the higher the insurance rates. Conversely, driving a lower-than-average number of miles each year can reduce insurance rates as it indicates a lower risk profile. Insurers often ask about a driver's estimated annual mileage and how they use their vehicle, i.e. whether for commuting or pleasure, to assess the risk and set insurance rates accordingly.

Annual mileage and insurance premiums

Annual mileage is a key factor that insurance companies consider when determining insurance rates and premiums. This is because the more time spent on the road, the higher the risk of being involved in a car accident.

Insurers rank their car insurance policy costs using three mileage categories: low, average, and high mileage. Low mileage is typically considered under 7,500 miles per year, or less than 10 miles per day. Average mileage includes an annual coverage of 7,500–15,000 miles, or 20 miles daily. High mileage is considered over 15,000 miles annually or 40 miles per day.

In the US, the average cost of car insurance is $2,458 per year, or $205 per month, for a full-coverage policy. However, this can vary depending on individual factors such as state, age, annual mileage, and the type of car. For example, a car insurance policy with 20,000 miles or more driven annually is 36% more expensive than a policy for a driver who drives 5,000 miles or fewer per year.

Insurance companies may ask for mileage information when you renew or apply for auto insurance. Some carriers may also check mileage when you renew your policy by asking for a photo of the odometer or checking the vehicle's last MOT mileage. Providing the correct details will ensure you do not pay more than required.

It is important to note that while mileage is a significant factor in determining insurance rates, it is not the only factor. Other considerations include age, credit history, accident history, and usage.

Mileage and accident risk

However, the relationship between mileage and accident involvement is a controversial topic, with few studies on the subject. Most of the studies that do exist are methodologically weak, with highly inconsistent and potentially misleading results. The assumption of a linear proportional relationship between mileage and accidents does not fit the obtained data. For example, people driving low mileages tend to accumulate much of their mileage on congested city streets with two-way traffic and no restrictions on access, while high-mileage drivers typically accumulate most of their miles on freeways or multilane highways with limited access. As the driving task is simpler on freeways, the accident rate per mile is much lower, and a person driving half as many miles as another would be expected to have considerably more than half as many accidents.

Insurers rank their car insurance policy costs across three mileage categories: low, average, and high mileage. The low-mileage category is the cheapest and usually comprises drivers who drive under 7,500 miles per year or less than 10 miles per day. Average mileage is more expensive and includes an annual mileage coverage of 7,500–15,000, or 20 miles daily. The most expensive category is high mileage, with over 15,000 miles annually or 40 miles per day.

Insurers also care about the distance of your daily commute and how often you make it. For example, if you live in a suburb of a larger metropolitan area, your base insurance rates will be better. However, if you commute 40 miles each way into the downtown area of a major city, your rates may rise. This is because you are commuting into a busy, traffic-packed metropolitan area for work, which puts you at more risk of an accident than driving a few miles to work locally with less traffic.

Mileage estimation

In the US, the average mileage for low-mileage insurance is 7,500 miles per year, with some insurers setting the bar at 7,000 or 5,000 miles. Insurers may also offer pay-per-mile insurance or usage-based insurance, which can be beneficial for those who drive infrequently. These policies match rates to driving habits and can help keep premiums low.

To estimate annual mileage, one can review official service records, contact mechanics for vehicle service history, or calculate based on recent mechanic records. Another method is to track monthly mileage and multiply it by 12, though this may not account for extra mileage from vacations. It is important to provide accurate estimates to insurers as underestimating mileage could invalidate insurance claims.

In California, drivers must submit mileage estimation forms every three years, with supporting documentation for unusually low estimates. Failure to return the form may result in a policy increase to the state average. Similarly, in the UK, underreporting annual mileage may be considered insurance fraud, leading to a refusal of policy renewal. It is generally advisable to inform insurers of any changes in mileage to avoid issues with insurance claims.

Mileage-based insurance programs

UBI programs generally fall into two categories. The first type monitors driving behaviours such as mileage, the time of day you drive, and changes in speed. These are often referred to as "pay-how-you-drive" programs. The second type of UBI only tracks the number of miles driven and is called "pay-as-you-drive", "pay-as-you-go", or "pay-per-mile" plans.

Pay-per-mile insurance is best suited for people who don't drive often. It determines your rate based on how far you drive, usually charging a monthly base rate plus a per-mile charge. This type of insurance is different from a low-mileage discount offered by some auto insurers, where a percentage is discounted from the cost of a traditional policy.

UBI programs can be beneficial for both insurance companies and drivers. Insurance companies can motivate policyholders to drive more safely, while drivers can often snag a lower premium with UBI than with traditional insurance. Penny Gusner, an analyst for Insurance.com and CarInsurance.com, states that "how much you save depends on the plan and how you drive, naturally, but typically, you can reduce your rate by 10% to 30%".

It's important to note that the availability and details of UBI programs can vary by state and insurance company. Some companies that offer UBI programs include Allstate Drivewise, Esurance DriveSense, Liberty Mutual RightTrack, Metromile, Nationwide SmartRide, and State Farm Drive Safe & Save.

Low-mileage discounts

Mileage is one of the many factors that car insurance companies consider when determining insurance rates and premiums. Generally, the more you drive, the higher your insurance rates will be. This is because the more time spent on the road, the higher the risk of being involved in an accident.

Insurers rank their car insurance policy costs using three mileage categories: low, average, and high mileage. The low-mileage category is the cheapest and usually comprises drivers who drive under 7,500 miles per year or less than 10 miles per day. The average mileage category is more expensive and includes an annual mileage coverage of 7,500–15,000 miles, or 20 miles daily. The most expensive category is the high mileage category, with over 15,000 miles annually or 40 miles per day.

Some car insurance companies offer low-mileage discounts for policyholders who drive less than a certain number of miles per year. To qualify for low-mileage discounts, you usually need to drive less than 7,000 or 5,000 miles a year. The qualifying requirements and discounts can vary, so it is important to speak to an agent or customer service representative to learn more.

In California, drivers may be required to submit a mileage estimation form every three years. This form asks for an estimation of the next year's mileage and may request supporting documentation if the estimate is unusually low. Failure to return the form before the policy is renewed can result in insurance companies updating the annual mileage to the state average, causing a policy increase.

Similarly, in New York, drivers can qualify for low-mileage insurance discounts by maintaining an annual mileage below 12,000 miles, with maximum discounts for under 7,500 miles. Top insurers like Metromile, Nationwide, Allstate, and Progressive offer competitive low-mileage discounts that can be enhanced by bundling policies and taking additional safety courses.

To save on premiums, you can also consider enrolling in a usage-based insurance program, which tracks your driving habits and/or mileage to offer you a safe driver discount. Pay-per-mile is a type of usage-based insurance, but some companies provide non-mileage-based programs that only track your habits, and some offer programs that track both. While the programs vary, some habits tracked include hard braking, fast acceleration, hard cornering, speeding, and phone usage.

Frequently asked questions