Jane Dotson
Driving fewer miles can save you money on your car insurance. This is because the more you drive, the more likely you are to be involved in an accident and to make a claim. Insurance companies use your annual mileage to predict your risk of filing a claim, so the fewer miles you drive, the lower your insurance rate may be. Some insurance companies offer low-mileage discounts, usage-based insurance discounts, or pay-per-mile insurance products, where your mileage determines your premium and a monthly base rate. However, the impact of mileage on insurance rates is not an exact science, and insurance companies take other factors into account when setting premiums.
| Characteristics | Values |
|---|---|
| Mileage impact on insurance | The more miles you drive, the higher your insurance rate could be. |
| Insurance company tracking | Insurance companies track your mileage through MOT certificates, databases, telematics programs, or devices attached to your car's computer. |
| Low-mileage insurance | Insurance companies may offer low-mileage discounts or usage-based insurance discounts for drivers who drive less than average. |
| Pay-per-mile insurance | Some companies offer pay-per-mile insurance, where your premium is based on the number of miles you drive and a flat monthly rate. |
| Insurance savings | Driving fewer miles can lead to insurance savings by reducing the risk of accidents and claims. |
| Insurance calculation | Mileage is one of many factors insurance companies use to calculate premiums, including driving habits and vehicle usage. |
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What You'll Learn
Mileage-based insurance companies
Most companies measure the miles you drive through a device attached to your car's computer, or by using a mobile app. Some companies may also allow you to take a picture of your car's odometer. Mileage-based insurance companies also take into account how you drive, including where and when you drive, how fast you go, and your braking and acceleration habits.
Some examples of mileage-based insurance companies include:
- Metromile: This company has a two-part pricing system with a low monthly base rate and a second per-mile rate.
- Mile Auto: Another per-mile insurer, which claims drivers can save 30-40% on their car insurance rates.
- Nationwide SmartMiles: This pay-per-mile program has a base rate and a cost per mile and is available in 45 states.
- Allstate Milewise: Milewise combines a daily rate with a per-mile rate and is available in more than a dozen states.
- State Farm: State Farm offers a program that tracks your mileage and provides discounts based on annual mileage.
It is important to note that each insurance company defines the mileage threshold for low-mileage drivers differently. While some companies classify low-mileage as driving less than 7,000 miles per year, others use 5,000 or 7,500 miles as the threshold.
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Low-mileage discounts
Driving fewer miles can lead to lower insurance rates. This is because the fewer miles you drive, the less likely you are to be involved in an accident, and the lower your risk profile will be.
Many insurance companies offer low-mileage discounts, usage-based insurance discounts, or pay-per-mile insurance products. With usage-based insurance, a device is plugged into your car's computer or a smartphone app is used to monitor your driving habits, including how many miles you drive, where and when you drive, and how fast you go. This type of insurance can be a good option for people who work from home or don't drive their car regularly. Some companies offer a cap on the number of miles you drive each day, so you don't get charged extra for an occasional long trip.
The threshold for qualifying as a low-mileage driver varies between insurance companies. Generally, driving less than 7,000 or 5,000 miles a year will qualify you for a low-mileage discount. However, some companies may consider under 10,000 miles to be low mileage. The Federal Highway Administration reports that the average American drives 13,476 miles per year, so driving less than this could be considered low mileage.
If you are driving significantly less than you used to, it's a good idea to contact your insurance company and let them know, as they may be able to offer you a lower rate or a refund. It's important to accurately report your car usage and mileage, as misleading your insurer can be considered insurance fraud.
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Usage-based insurance
UBI programs collect vehicle telematics data via cellular, GPS, or other technology. This data includes information on driving behaviours such as speeding, harsh braking, rapid acceleration, and the time of day the vehicle is used. The technology used to track this data depends on the insurance company and may include a smartphone app, systems built into the vehicle, or a device plugged into the vehicle's on-board diagnostics (OBD-II) port.
UBI programs typically involve an initial review period, after which the driver may be offered a discount based on the telematics data and their driving score. Participation in a UBI program can result in both immediate discounts and long-term savings, as safer driving habits lead to lower insurance rates. Additionally, UBI programs can help drivers improve their driving habits and make roads safer by providing analysis and feedback on their driving performance.
However, it is important to note that UBI programs may not be available in all states and there are privacy concerns associated with continuous GPS tracking of vehicles. Additionally, according to a 2022 report, over 40% of consumers who enrolled in a UBI program saw their rates increase. Therefore, it is crucial to understand the program's rules and potential consequences before signing up.
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Pay-per-mile insurance
Driving fewer miles can impact car insurance rates by creating a lower-risk profile. The fewer miles you drive, the less likely you are to be involved in an accident, and the less wear and tear your vehicle suffers, leading to fewer mechanical failure-related claims.
Some insurance companies offer pay-per-mile insurance, also known as pay-as-you-go, pay-by-mileage, or usage-based insurance. This type of insurance tracks motorists' mileage and charges them based on the amount they drive. It is designed for drivers who don't put a lot of miles on their vehicles each year.
With pay-per-mile insurance, you pay a flat fee and a per-mile fee, which are added together to calculate your monthly premium. The flat fee is based on factors such as your age, gender, and vehicle, while the per-mile fee is based on the number of miles you drive. Some insurers cap the number of miles you can drive per day, so you don't get charged too much for the occasional long-distance trip.
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Driving habits and low mileage
Driving less can save you money on your car insurance, but this is not the only factor that determines the cost of your insurance. Insurers take lots of other things into account when working out your insurance price.
The average American drives 13,476 miles per year, according to the Federal Highway Administration (FHA). If you drive fewer miles than this, you may be able to get a lower insurance rate. This is because the more miles you drive, the higher your chance of getting into an accident and making a claim. So, insurance companies consider you a higher risk, and your rates will reflect this.
Some insurance companies offer specific low-mileage insurance plans, which can be a good option for drivers who drive less than average. These include pay-per-mile insurance, where you pay a base daily rate for every day you drive, plus a per-mile charge for each mile driven. Mile Auto, a per-mile insurer, claims drivers can save 30% to 40% on their car insurance rates. Other insurance companies offer usage-based insurance, where your annual mileage is tracked and may be weighted more heavily than other rating factors. However, usage-based insurance also tracks other driving behaviours, such as distracted driving and speeding, which not all policyholders are comfortable with.
To qualify for low-mileage discounts, you usually need to drive less than 7,000 or 5,000 miles a year. Your car insurance rates will be higher if you drive more than 20 miles each way to work. If you are driving significantly less than in the past, you might save money on your car insurance premiums by contacting your insurance agent or company and letting them know about the change.
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Frequently asked questions
Yes, driving fewer miles will generally save you money on your insurance. This is because the fewer miles you drive, the less likely you are to be involved in an accident and make a claim.
When you apply for insurance, you will be asked to estimate your annual mileage. Insurance companies can then check your MOT to see if your estimated mileage matches the official records. Some insurers may also confirm your mileage by searching databases, which include your mileage totals as reported by state inspection providers, car dealers, and repair shops. You may also be asked to sign up for a telematics program, which tracks your mileage in exchange for the opportunity to earn discounts.
This varies by insurer. Some insurers offer low rates for those driving under 10,000 miles per year, while others offer discounts for those driving under 7,000 or 5,000 miles per year.
There are several types of insurance plans available for low-mileage drivers, including pay-per-mile insurance, usage-based insurance, and low-mileage insurance. Pay-per-mile insurance plans charge a base daily rate for each day you drive, plus a per-mile charge for each mile driven. Usage-based insurance also tracks your mileage but goes a step further by monitoring your driving habits, such as speeding or abrupt braking. Low-mileage insurance, also known as pay-per-mileage insurance, charges a flat monthly rate plus a small per-mile fee.
