Mileage Impact: Low-Mileage Insurance

The definition of low mileage varies across insurance providers, but it generally refers to those who drive infrequently or under a certain mileage every year. While the average driver travels almost 13,500 miles per year, if you drive less than this, you may be considered a low-mileage driver. Some insurers consider 12,000 miles per year to be lower than average, while others believe it needs to be under 10,000 miles.

Low-mileage discounts

• Definition of Low Mileage: While the technical definition of low mileage is any number of miles below the average, insurance companies typically consider 12,000 miles per year as the threshold. However, some insurers may offer bigger discounts if you drive less than 10,000 miles or even less than 7,000 or 5,000 miles per year.
• Insurance Rates and Mileage: The number of miles you drive annually affects your insurance rates because it predicts the risk of you filing a claim. The more miles you drive, the higher the chance of an accident, so insurance companies consider you a higher risk and charge higher rates. Conversely, driving fewer miles makes you eligible for lower rates and low-mileage discounts.
• Average Savings: According to Insure.com's data, many drivers receive a low-mileage discount of 5% or less on average nationally. However, in states like California, with unique laws regarding rating factors, drivers can get discounts of around 11%.
• Insurance Company Considerations: When determining your insurance rates, companies may also consider how you use your car. If you rarely drive your car and don't use it for regular errands or commuting, your insurer may classify it as a "pleasure" vehicle, which could qualify for a lower rate.
• Usage-Based Insurance (UBI): While not all insurance companies offer low-mileage discounts, many provide UBI programs that track your driving behaviour and mileage. These programs can offer savings if you drive less and exhibit safe driving habits. Examples include Progressive's Snapshot, Allstate's Drivewise, and Farmers' Signal.
• Pay-Per-Mile Insurance: Some insurance companies offer pay-per-mile insurance policies, where your rate is directly tied to your mileage. These programs usually include a base rate and a per-mile rate, with a maximum number of billable miles per day to accommodate road trips. Examples include Metromile, Allstate's Milewise, and Nationwide's SmartMiles.
• Finding Low-Mileage Insurance: To find low-mileage insurance, calculate your average weekly mileage and annual mileage. Then, contact your insurer or potential insurers to inquire about low-mileage discounts or quotes for pay-per-mile policies. You can also use online tools and calculators to compare insurance rates and find the best option for your situation.

Pay-per-mile insurance

The definition of a low-mileage driver varies across insurance providers, but it generally refers to those who drive infrequently or under a certain mileage every year. Insurance companies consider 12,000 miles a year to be lower than average, but some insurers find that you have to drive less than 10,000 miles to qualify for low-mileage discounts. Some insurers might offer even bigger low-mileage discounts if you drive less than 7,000 or 5,000 miles annually.

Most insurers track mileage using a device that plugs into the car's OBD port under the dashboard. Some insurers, like Allstate, require you to preload funds onto your pay-per-mile account, and then charges are deducted based on how many miles you drive.

Some of the best pay-per-mile insurance companies are Allstate, Metromile, and Mile Auto, as they offer competitive rates and easy-to-use programs.

Metromile offers a sample rate of $29 per month plus six cents for each mile driven. Most pay-per-mile insurance policies have a mileage cap, meaning that you will only be charged for a set number of miles per day. For example, if you drive 250 miles in one day but the mileage cap is 150 miles, you will only be charged for the first 150 miles.

Usage-based insurance

UBI programs can result in cheaper car insurance if your driving scores well. The better you drive, the better your auto insurance rates. However, it's important to note that UBI programs can also lead to higher insurance rates if your driving habits are not deemed safe.

There are two basic types of UBI 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.

UBI programs have become popular as they leverage technology to help auto insurers more accurately measure your risk of getting into an accident. Some benefits of UBI programs include discounted premiums, safer driving, improved driving habits, and easier accident investigation.

When considering a UBI program, it's important to keep in mind that not all drivers will get cheaper car insurance rates. If you frequently engage in high-risk driving behaviours, your insurer may raise your policy cost. Additionally, the device or app may not always be able to differentiate between defensive driving and unsafe driving.

To get the most out of a UBI program, it's recommended that you drive less, especially after midnight, as accidents are common during this time. It's also helpful to check the feedback from the program to improve your driving habits and avoid distractions while driving.

Telematics

Some insurance companies offer telematics apps that track your driving and provide usage-based discounts. For example, USAA offers the lowest annual rates, on average, for low-mileage drivers, or motorists who drive 6,000 miles or fewer per year.

There are also pay-per-mile insurance options, where you pay a base rate and then a cost per mile. For example, Allstate's Milewise program charges a daily rate, with additional charges for each mile driven.

There are pros and cons to telematics insurance. On the one hand, good drivers can receive cheaper rates based on their safe driving habits. Usage-based plans also partially circumvent the potential unfairness of insurers pricing quotes based on non-driving factors like credit score or location. You may also be incentivised to use your car less frequently, which can help the environment and reduce the likelihood of a collision.

On the other hand, drivers with long commutes may not enjoy the benefit of lower rates. If your schedule requires you to drive at night, you could also face higher-than-expected insurance rates.

Mileage-based insurance

With mileage-based insurance, you pay a monthly base rate that stays the same, plus a monthly mileage rate that can change. The monthly base rate is typically determined using factors such as gender, age, and car make and model, similar to a traditional car insurance quote. The monthly mileage rate is based on how many miles you drive, and it can vary from month to month depending on your mileage.

Some insurance companies use technology known as "telematics" to track your mileage, either through an app or a device that plugs into your car. Telematics can also track risky driving behaviours, such as hard braking or quick acceleration. Other companies, like Mile Auto, simply require you to send a photo of your odometer once a month to track your mileage.

The cost of mileage-based insurance varies by insurer and how much you drive. It is important to note that your own driving history and personal characteristics are also used to determine 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).

Some companies that offer mileage-based insurance include Metromile, Mile Auto, Allstate, and Nationwide. These companies typically use either a plug-in device or a mobile app to track your mileage. It is important to note that mileage-based insurance may not be available in all states.

Frequently asked questions