How Driving Less Can Reduce Your Insurance Costs

Driving less can lower your insurance premium, but it's not the only factor that determines the cost of your insurance. Mileage is one of the biggest factors that auto insurance companies consider when setting premiums. The more miles you drive, the higher your rate is likely to be. This is because the more you drive, the more likely you are to be involved in an accident and the more wear and tear your vehicle will experience. However, other factors, such as your driving record, the type of car you drive, and your neighbourhood, also play a role in determining your premium.

Low-mileage discounts

Mileage is one of the biggest factors that auto insurance companies consider when determining insurance premiums. The more miles you drive, the higher your rate is likely to be. This is because the more you drive, the more likely you are to be involved in an accident, and the more wear and tear your vehicle will experience, leading to an increased number of mechanical failure-related claims.

Most insurance companies offer low-mileage discounts, and some also provide pay-per-mile policies that can reduce costs for low-mileage drivers. If you have a car that you don't use very often, or if you work from home, pay-per-mile insurance may be a good option for you. With this type of policy, the less you drive, the less you pay.

In the US, most insurance companies consider someone who drives between 0 and 7,500 miles per year a "low-mileage driver". However, each insurance company has its own definition of low mileage. For example, some companies offer discounts to drivers who log less than 7,000 miles annually.

If you are a low-mileage driver, you may need to look beyond standard car insurance policies to find significant discounts. For example, you could consider a usage-based insurance company, which uses telematics to calculate your insurance policy based on how you drive and how much you drive. While this option may not suit those concerned about privacy, traditional insurance companies typically offer low-mileage discounts. According to The Zebra, USAA and State Farm offer the cheapest premiums for low-mileage drivers.

In addition to choosing an insurance company that rewards low-mileage driving, you can also reduce your premium in other ways. For example, you can increase your deductible limit, switch your car insurance provider, add a kilometre restriction, or raise your excess.

Usage-based insurance

UBI programs collect vehicle telematics data from cellular, GPS or other technology. This data includes driving behaviours such as speeding, harsh braking, rapid acceleration, the time of day you drive, and distracted driving. The technology used to track your car's telematics data depends on your car insurance company. Generally, driving data is collected through a smartphone app, systems built into your vehicle, or a device plugged into your vehicle's on-board diagnostics (OBD-II) port.

There are two basic types of usage-based programs: driving-based and mileage-based. Driving-based programs measure your driving habits, such as how hard and how often you brake, how quickly you accelerate, and the time of day you drive. Mileage-based programs only measure how many miles you drive. Both programs rely on telematics to gather information about your driving behaviour.

UBI can lead to lower insurance rates, with some insurers offering immediate discounts for participation. UBI can also lead to long-term savings, as data collected by your insurer proving you're a safe driver equates to a lower car insurance rate. UBI can also help drivers improve their driving habits, as they are more likely to operate their vehicle cautiously when they know they are being monitored.

However, UBI may not be for everyone. According to a JD Power auto insurance report in 2022, over 40% of consumers who enrolled in a UBI program saw their rates increase. There are also privacy concerns with UBI, as personal information such as where you drive may be inferred from data such as speed and distance driven.

Pay-per-mile insurance

The number of miles you drive is one of the biggest factors that auto insurance companies consider when determining your premiums. Generally, a person who maintains a low yearly mileage will pay less than a person who covers more mileage. Most insurance companies consider someone who drives between 0 and 7,500 miles per year a "low-mileage driver".

The pricing structure of pay-per-mile insurance tends to make the monthly premium cheaper, especially for drivers who don't drive a lot. This is because it is less risky for auto insurance companies to insure drivers who spend less time on the road. Drivers who spend more time on the road are more likely to have an accident and file a claim. Even if you drive more miles than usual one month, you can still save significantly with a pay-per-mile policy.

Insurance companies typically use telematics to track the number of miles that pay-per-mile policyholders drive. Some insurers ask policyholders to install a plug-in device that monitors their mileage. If you are concerned about privacy, you can consider insurers like Mile Auto, which allow policyholders to send a photo of their odometer as proof of mileage traveled.

Neighbourhood and insurance rates

The neighbourhood in which a house is located can affect its insurance rates. Insurance carriers partially calculate rates by zip code and neighbourhood, factoring in the crime rate statistics of the area. Crime rates can vary significantly from neighbourhood to neighbourhood, and insurance premiums are based partly on the amount of money paid out in claims. If several of your neighbours have filed claims for theft or vandalism, your rates could be impacted.

The proximity of a house to a fire station or fire hydrant also affects insurance rates. A home that is only a few minutes away from a fire station will have lower insurance rates than a home that is 10 minutes away. This is because fire incidents frequently prompt insurance claims, and the damage can be contained more quickly if the fire station is closer. The same logic applies to the proximity of a professional fire station versus a volunteer fire team.

The age of a home can also affect insurance rates. Older homes may have more risks, such as outdated wiring, plumbing, and mechanicals. The presence of a swimming pool, trampoline, guest house, or aggressive breed of dog can also lead to higher rates.

Insurance rates can also be influenced by the neighbourhood's exposure to natural disasters. For example, if a neighbourhood is prone to tornadoes, hurricanes, earthquakes, or wildfires, insurance rates may be higher to account for potential repair and replacement costs.

It is important to note that other factors besides neighbourhood can also impact insurance rates. These include driving habits, the type of car, and an individual's driving record. Additionally, insurance companies may offer low-mileage discounts, which can further reduce rates for those who drive less.

Driving record and insurance rates

Driving less can help you save on insurance, but it's not the only factor that determines the cost of your insurance. Your driving record is also a key consideration when it comes to insurance rates.

Insurance companies use your driving record to determine how much of a risk you are, and this directly impacts the rates you'll be offered. If you have been involved in multiple accidents, your insurance rates will be higher. Similarly, speeding tickets and DUIs will also negatively impact your record and result in higher insurance rates.

Your driving record is a crucial factor in risk assessment, which is the basis of car insurance. The more miles you drive, the more likely you are to be involved in an accident. This is why insurance companies ask how many miles you drive per year and use this information to calculate your insurance rates.

If you drive fewer miles, you are statistically less likely to be involved in an accident, and your insurance rates may be lower as a result. This is especially true if you drive less than the average number of miles per year, which is around 13,000 miles according to the US Department of Transportation.

However, it's important to note that simply driving fewer miles does not automatically mean your insurance will be cheaper. Other factors come into play, such as your driving habits and the type of car you drive. If you have risky driving habits, your insurance rates may be higher, even if you drive fewer miles.

To get the best insurance rates, it's recommended to shop around and compare quotes from different insurance providers. You may also consider usage-based insurance, low-mileage insurance, or pay-per-mile insurance, which are designed for low-mileage drivers. Additionally, you can tweak factors such as your driving habits and the type of car you drive to pay lower rates in the long run.

Frequently asked questions