Mileage And Auto Insurance: What's The Link?

The definition of a low-mileage driver varies across insurance providers, but it generally refers to those who drive infrequently or under a certain number of miles each year. While the threshold for low mileage varies, it typically falls between 7,500 and 10,000 miles annually. Drivers who fall below this threshold may be eligible for reduced insurance rates or discounts, as insurance companies assume that those on the roads less often will be less likely to have accidents.

Low-mileage insurance discounts

Low-mileage insurance is a type of car insurance that offers reduced rates for drivers who don't drive a lot. This is usually defined as driving fewer than 7,500 miles per year, or around 20 miles per day. The idea is that if you're on the road less, you're less likely to get into an accident and make a claim. As a result, insurance companies consider you a lower risk and offer discounted rates.

There are two main types of low-mileage insurance:

• Traditional Low-Mileage Discounts: This is the most common type, where insurance companies offer a discount if you drive fewer than a certain number of miles each year.
• Pay-Per-Mile Insurance: This is a newer type of insurance where your rate is calculated based on your exact mileage. This is often tracked through an app or a device plugged into your car's diagnostic port.

How to Qualify for Low-Mileage Insurance

To qualify for low-mileage insurance, you typically need to drive less than 7,500 miles per year. However, this can vary by insurance company, so it's always best to check with your provider. Some companies may also require you to be a policyholder for a certain number of years before offering a low-mileage discount.

Best Companies for Low-Mileage Insurance

Several insurance companies offer low-mileage discounts or pay-per-mile insurance plans. Here are some of the best options:

• USAA: USAA offers low-mileage discounts and has very competitive rates for military members and their families.
• State Farm: State Farm offers the largest low-mileage discount, saving drivers $115 per year on average.
• GEICO: GEICO is the cheapest option overall for low-mileage coverage and is available to everyone, not just military members.
• Nationwide: Nationwide offers both traditional low-mileage discounts and a pay-per-mile insurance plan called SmartMiles.
• Metromile: Metromile is a newer company that exclusively offers pay-per-mile insurance. They have a two-part pricing system with a low base rate and a per-mile rate.
• Root: Root is another newer company that bases its rates primarily on your driving habits, including mileage.
• Allstate: Allstate offers a pay-per-mile insurance program called Milewise, which has a daily rate plus a per-mile charge.

Tips for Saving on Car Insurance

While low-mileage discounts can help you save, there are also other ways to reduce your car insurance costs:

• Shop Around: Compare quotes from multiple companies to find the most affordable option for your needs.
• Improve Your Driving Record: A clean driving record can lead to lower insurance rates.
• Improve Your Credit Score: Insurance companies often use your credit score as a factor in determining your rates.
• Bundle Your Policies: You can often get a discount by bundling your car insurance with other types of insurance, such as homeowners or renters insurance.
• Liability-Only Coverage: If you own your vehicle outright, consider dropping comprehensive and collision coverage to save money.

Pay-per-mile insurance

Who is it good for?

Who is it not good for?

The following companies offer pay-per-mile insurance:

• Allstate: Milewise
• Metromile
• Mile Auto
• Nationwide: SmartMiles
• Noblr
• Lemonade
• Root

The cost of pay-per-mile insurance depends on a number of factors, but policies typically include a base rate and a per-mile rate. The base rate is usually calculated using standard rating factors, such as driving record, age, gender, ZIP code, and vehicle. The per-mile rate is usually between 2 and 10 cents.

Usage-based insurance

UBI programs collect vehicle "telematics" data that comes from cellular, GPS, or other technology. The technology used to track your car’s telematics data depends on your car insurance company. Generally, driving data is collected through systems built into your car, a device plugged into your car’s on-board diagnostics (OBD-II) port, a smartphone app, or a device called a “tag” that is installed on your windshield or rear window and pairs with your smartphone via Bluetooth.

UBI is ideal for students, retirees, stay-at-home parents, and drivers who don’t commute in a car because they work from home or take public transit to work. Drivers usually save 10% to 15% annually with UBI. The best discounts go to safe drivers who don’t rack up a lot of mileage, though pricing factors vary between companies.

There are two basic types of UBI programs: driving-based and mileage-based. Driving-based programs measure 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 programs only measure how many miles you drive. Both programs rely on telematics to gather information about your driving behavior.

UBI has become popular as it leverages technology to help auto insurers more accurately measure your risk for an accident. Benefits of UBI include discounted premiums, safer driving, improved driving habits, and easier accident investigations. However, not all drivers will get cheaper car insurance rates with UBI programs. If you aggressively accelerate or frequently slam your brakes, your insurer could raise the cost of your policy.

Telematics insurance

• Potential discounts: If you drive fewer miles than the average driver or exhibit safe driving behaviours, you may be eligible for a discount on your insurance rates. The discount amount can vary depending on your driving habits and the insurance provider.
• Customised rates: Telematics insurance takes into account your individual driving habits, resulting in insurance rates that are tailored specifically to you. This can be advantageous if you drive less frequently or consider yourself a safe driver.
• Improved driving habits: The feedback provided by telematics devices or apps can help you become more aware of your driving habits and make positive changes. For example, you may be encouraged to reduce harsh braking or acceleration, which can improve your safety on the road.
• Flexibility: With telematics insurance, you may have the option to choose the type of telematics technology you use, such as a smartphone app or a plug-in device. This allows you to select the method that best suits your needs and preferences.

However, there are also some potential disadvantages to consider:

• Privacy concerns: Telematics insurance requires the collection of personal driving data, which may raise privacy concerns for some individuals. It's important to review the data collection practices of the insurance provider and understand how your information will be used and protected.
• Potential for higher rates: If you are considered a "high-risk" driver based on your driving habits, you may end up paying higher insurance rates. This is especially relevant if you frequently drive during rush hour or at night, accelerate quickly, or brake harshly.
• Inconsistent discounts: The discount offered through telematics insurance may fluctuate from month to month, depending on your driving behaviour. If you have a particularly safe driving month, your discount may be higher, but if your driving habits change, your discount could be lower.
• Difficulty in distinguishing drivers: In some cases, telematics apps may not be able to differentiate between the driver and a passenger, especially when using a smartphone app. This can lead to inaccurate data collection and the need to dispute the information collected.

Overall, telematics insurance can be a beneficial option for drivers who want their insurance rates to reflect their individual driving habits and mileage. By providing customised rates and encouraging safer driving behaviours, telematics insurance offers a personalised approach to auto insurance. However, it's important to carefully review the terms, conditions, and potential drawbacks before enrolling in any telematics insurance program.

Average mileage and how it affects insurance rates

The average number of miles driven by Americans in a year is 13,476, according to data from the Department of Transportation's Federal Highway Administration (FHWA). This data was last updated in May 2022.

The number of miles you drive annually can have a significant impact on your car insurance rates. Insurance companies often use mileage brackets to determine insurance rates, and your rates can be higher or lower based on where your annual mileage falls within these brackets. Generally, insurance companies consider 12,000 miles per year to be lower than average, with some insurers considering the threshold to be under 10,000 miles.

If you drive less than the average number of miles, you may be considered a low-mileage driver and may be eligible for lower insurance rates or discounts. Insurance companies reward those who pose less risk, so drivers who drive less receive low-mileage car insurance discounts. This is because the fewer miles you drive, the lower the chance of getting into an accident.

On the other hand, if you drive more than the average number of miles, your insurance rates may be higher. This is because the more you're on the road, the higher the likelihood of being involved in an accident. Insurance companies consider you a higher risk, and your rates will reflect this.

Some insurance companies offer pay-per-mile or usage-based insurance policies, which can be beneficial for low-mileage drivers. These policies track your mileage and driving behaviour and offer discounts for safe driving habits and low mileage. However, these programs may not be available in all states, and there may be privacy concerns associated with tracking technology.

To get low-mileage car insurance, you need to determine if you meet the eligibility requirements, which is typically driving less than 7,500 to 10,000 miles per year. You can calculate your current annual mileage by setting your car's odometer to zero and multiplying the number of miles driven in a week by 52. Then, you can reach out to insurance companies to see if you qualify for a low-mileage discount or a pay-per-mile policy.

It's important to note that low-mileage discounts tend to be relatively minor, and shopping around for insurance rates and comparing quotes may be a more effective way to save money on your car insurance. Other factors that can impact your insurance rates include your age, driving record, credit history, location, and vehicle type.

Frequently asked questions