How Low Mileage Affects Auto Insurance Rates

Driving less can result in cheaper auto insurance, but it's not that simple. The number of miles you drive annually is a significant factor in determining your insurance premium. Generally, the more you drive, the higher your premium will be as there is a higher chance of getting into an accident. However, other factors also play a role, and it's possible to have a higher premium than someone who drives more miles.

Most insurance companies offer low-mileage discounts if you drive less than a certain number of miles per year, which is usually around 7,000 to 10,000 miles. These discounts can vary from 5% to 20%, but the exact amount depends on the company and your driving record. Additionally, some companies offer pay-per-mile insurance, where your monthly rate is based on a base rate plus a charge per mile driven. This can be a great option for people who work from home or use public transportation.

To get cheaper auto insurance, it's important to shop around and compare rates from different companies. You should also consider usage-based insurance programs, which monitor your driving behaviour and offer discounts for safe driving. However, be aware that your rates could increase if your driving score is low.

Low-mileage discounts

The average American drives approximately 13,000 miles per year, but if you drive fewer than 7,500 miles per year, you may be eligible for a discount of 5-10%, depending on your insurance company and how little you drive. Generally, the less you drive, the more you save.

It's important to note that the discount is based on a 12-month driving period, so you won't see immediate savings if you start driving less. Your eligibility is determined when your policy renews, and your insurance company may check the Registry of Motor Vehicles records for the mileage reported on your vehicle during its last inspection.

To qualify for the low-mileage discount, you may need to provide proof of your mileage, such as a photo of your odometer or service paperwork that's at least 90 days old, along with a current odometer reading.

Some insurance companies that offer low-mileage discounts include:

• USAA
• Safeco Insurance
• American Family Insurance
• Farm Bureau
• PEMCO

It's worth checking with your insurance agent to see if you're eligible for any low-mileage discounts, especially if your average mileage has changed since last year. Additionally, consider shopping around and comparing rates from different insurance companies to find the best deal for your situation.

Pay-per-mile insurance

How It Works

Tracking Your Miles

Insurance companies use "telematics" technology to track your mileage. This can be done through an app or a device that plugs into your car. Some companies, like Mile Auto, also give you the option to send a photo of your odometer once a month instead.

Savings

The cost of pay-per-mile insurance varies depending on the insurer and how much you drive. Your driving history and personal characteristics are also taken into account when determining your monthly base rate.

To estimate your monthly rate, you can use the following formula:

> Monthly base rate + (Per-mile rate x Approximate number of miles driven per month)

For example, if your base rate is $34 and your per-mile rate is $0.05, and you drive 800 miles in a month, your monthly rate would be $74.

Companies That Offer Pay-Per-Mile Insurance

Not all insurance companies offer pay-per-mile insurance, and availability also varies by state. Some of the companies that do offer this type of insurance include:

• Metromile
• Mile Auto
• Allstate Milewise
• Nationwide SmartMiles
• Just Insure

Usage-based insurance

There are two basic types of UBI programs:

• Driving-based: This type of program measures your driving habits 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.

UBI programs use telematics to gather information about your driving behaviour. Telematics can transmit data from moving vehicles and share it with an information centre. This can be done through a device plugged into your vehicle's on-board diagnostics (OBD-II) port or a mobile app downloaded on your smartphone.

While UBI can result in cheaper insurance rates, it's important to note that it could also lead to an increase in your insurance premium if you don't score well. According to a TransUnion survey, car insurance rates decreased for only 48% of those enrolled in a telematics program, stayed the same for 30%, and increased for 18%.

Some advantages of UBI include:

• Discounted premiums: You may receive an immediate discount and long-term savings if you're a safe driver.
• Safer driving: Drivers tend to operate their vehicles more cautiously when they know they're being monitored.
• Improved habits: UBI programs can provide analysis to help you identify ways to become a better driver.
• Tracking helps with accidents: Knowing the speed and direction of the vehicles involved can aid in accident investigations.

However, there are also some potential disadvantages to consider, such as privacy concerns and the possibility of a premium increase if your driving behaviour doesn't meet the insurer's standards. Ultimately, the decision to enrol in a UBI program depends on your comfort level with data sharing and your driving habits.

Telematics

In addition to helping lower insurance costs, telematics insurance can also help policyholders develop safer driving habits by providing feedback and updates on their driving. It can also help locate your car if it is stolen and provide evidence in the event of an accident.

While telematics insurance is mainly targeted at young drivers, it can be beneficial for older drivers as well. Older drivers often face high insurance costs due to their age, and telematics can help them prove that they are safe drivers and obtain lower premiums. Additionally, if you drive fewer miles than average or only drive during low-risk times of the day, telematics can help you prove this and potentially reduce your premiums.

Overall, telematics insurance is a useful tool for drivers of all ages to potentially lower their insurance costs and improve their driving habits. However, it is important to carefully consider the restrictions and potential consequences of breaching any conditions before opting for this type of insurance.

Insurance fraud

Common Types of Car Insurance Fraud

• Counterfeit airbags: Deployed airbags are sometimes replaced with counterfeits, which can malfunction and put people's lives at risk.
• Staged accidents: These are intentionally caused collisions to receive fraudulent insurance payouts. Common types include swoop and squat, drive down, wave down, enhanced damages, panic stop, and sideswipe.
• Dishonest insurance professionals: Unscrupulous agents may steal your premiums, pocketing your money without setting up the coverage, leaving you uninsured.
• Windshield replacement rip-offs: Unscrupulous glass replacement contractors trick customers into unnecessary replacements, especially in states without deductibles for windshield replacement.
• Tow truck scams: Fraudulent tow services appear after an accident and demand high fees for repairs and vehicle release.
• Car insurance premium evasion: Policyholders deliberately mislead insurers by providing false addresses or omitting additional drivers to obtain lower premiums.

Other Types of Car Insurance Fraud

• Rate evasion: Providing false information to obtain insurance at a lower premium.
• False claims: Fabricating or exaggerating events to file claims for unrelated or non-existent incidents.
• Retroactive filing: Attempting to file a claim from before the policy was in effect.
• Faking a stolen car: Reporting a vehicle as stolen to receive compensation when it has not been stolen.
• Exaggerating or faking injuries: Embellishing injuries after an accident to claim higher compensation.

Tips for Avoiding Car Insurance Fraud

• Opt for original manufacturer parts when repairing your vehicle.
• Document all incidents, including accident damage, police reports, and invoices.
• Be cautious of unusual behaviour, such as individuals requesting personal or insurance information without providing their own details.
• Keep your vehicle insurance information private and only share it with your insurer or for official claims.
• Verify the legitimacy of your agent and insurance company to ensure they are licensed and reputable.
• Practise defensive driving to reduce the risk of accidents and potential fraud.
• Be suspicious of insurance prices that seem too good to be true, as they may be scams or exclude crucial coverage.

Frequently asked questions