One of the key factors that insurance companies consider when determining your car insurance premium is the number of miles you drive each year, commonly referred to as annual mileage. The more you drive, the more time you spend on the road, increasing the likelihood of being involved in an accident. Conversely, drivers who put fewer miles on their vehicles often pay less for insurance.
In this guide, we’ll explore how mileage affects your car insurance premium, why insurance companies care about mileage, and how to lower your premium by reducing your annual mileage.
1. Why Mileage Affects Car Insurance Premiums
Insurance companies base their premiums on risk, and one of the main factors that influence risk is how much you drive. The logic is simple: the more time you spend driving, the higher the probability of being involved in an accident. This is why drivers who put fewer miles on their vehicles often qualify for lower premiums.
Key Reasons Mileage Affects Premiums:
- Higher exposure to risk: The more miles you drive, the more time you spend on the road, increasing your exposure to potential accidents.
- Wear and tear: Vehicles that are driven more often are more prone to breakdowns, mechanical failures, and accidents, which can lead to more claims.
- Higher claims frequency: Statistically, higher-mileage drivers are more likely to file claims for accidents, damages, or other incidents, making them riskier to insure.
Because of these factors, insurance companies typically ask for an estimate of your annual mileage when you apply for a policy, and they may adjust your premium accordingly.
2. How Insurance Companies Classify Mileage
Insurance companies generally group drivers into categories based on their annual mileage to assess risk. While each insurer may have slightly different classifications, here are the typical mileage brackets:
Mileage Classifications:
- Low mileage: 0 – 7,500 miles per year
- Average mileage: 7,500 – 15,000 miles per year
- High mileage: 15,000+ miles per year
If you drive fewer miles than average, you may qualify for a low-mileage discount, while high-mileage drivers are likely to pay higher premiums. It’s essential to provide an accurate estimate of your annual mileage, as insurers may adjust your premium if they believe you’re underreporting.
3. Mileage and Types of Insurance Policies
The impact of mileage on your car insurance premium can vary depending on the type of policy you have. Here’s how mileage affects common types of car insurance policies:
1. Standard Car Insurance
With a standard car insurance policy, your mileage estimate will be factored into the overall calculation of your premium. Insurers may offer discounts for low-mileage drivers or charge higher premiums for those who drive long distances regularly.
2. Usage-Based Insurance (UBI)
Usage-based insurance is a type of policy where your premium is directly tied to how much and how safely you drive. With UBI, insurers typically use a telematics device or mobile app to track your mileage, driving habits, and time spent on the road. Drivers who drive fewer miles or exhibit safe driving behavior can benefit from lower premiums.
3. Pay-Per-Mile Insurance
Pay-per-mile insurance is ideal for drivers who don’t use their cars frequently. With this type of policy, your premium is based on a small base rate plus a per-mile charge. If you’re a low-mileage driver, this can result in significant savings compared to a standard insurance policy.
4. How to Report and Verify Your Mileage
When you apply for car insurance or renew your policy, your insurance company will ask you to estimate your annual mileage. It’s important to be as accurate as possible, as some insurers may ask for proof to verify your mileage.
Ways Insurance Companies Verify Mileage:
- Self-reporting: Most insurers rely on the honor system, asking drivers to estimate their mileage based on their typical driving patterns.
- Odometer readings: Some insurers may ask for your vehicle’s odometer reading at the start of your policy and compare it to the reading at renewal time to verify your mileage.
- Telematics devices: For usage-based or pay-per-mile insurance, insurers often use telematics devices that track your mileage in real-time.
- Service records: Insurance companies may use your vehicle’s maintenance records to verify your mileage. Service receipts often include odometer readings, which can be cross-referenced with your reported mileage.
Providing an accurate mileage estimate is essential because underreporting your mileage could lead to premium adjustments, policy cancellations, or denied claims if an insurer discovers discrepancies.
5. How to Lower Your Insurance Premium by Reducing Mileage
If you’re looking to reduce your car insurance premium, lowering your annual mileage is one of the most effective strategies. Here are some ways to reduce your mileage and potentially qualify for a low-mileage discount.
Tips for Reducing Your Annual Mileage:
- Carpool or ride-share: Sharing rides with coworkers or friends can significantly reduce the number of miles you drive each year.
- Use public transportation: If public transit is available in your area, consider using it for your daily commute or regular trips to reduce the number of miles on your vehicle.
- Work from home: If your job allows it, working from home—even a few days a week—can help you qualify for lower premiums by reducing your mileage.
- Walk or bike for short trips: For short errands, consider walking or biking instead of driving. This will not only reduce your mileage but also help you save on gas and vehicle wear.
- Plan efficient routes: When you do drive, plan your trips to minimize the number of miles you cover by consolidating errands or choosing the most direct routes.
By lowering your annual mileage, you may qualify for a low-mileage discount and reduce your overall insurance premium.
6. Low-Mileage Discounts: How to Qualify
Many insurers offer low-mileage discounts to drivers who cover fewer miles than average each year. To qualify, you’ll need to meet certain mileage thresholds, which vary by insurer. The discount you receive depends on your specific insurance company and how much lower your mileage is compared to the average driver.
Steps to Qualify for a Low-Mileage Discount:
- Report accurate mileage: Be honest about your annual mileage when applying for or renewing your policy.
- Check eligibility: Contact your insurer to find out if they offer low-mileage discounts and what the mileage threshold is.
- Verify your mileage: Keep track of your vehicle’s odometer readings and provide accurate mileage verification if requested by your insurer.
- Re-evaluate regularly: If your driving habits change (e.g., you start working from home), inform your insurer. You might qualify for a low-mileage discount at your next renewal.
Many insurance companies offer discounts ranging from 5% to 15% for low-mileage drivers, so it’s worth asking your insurer about this option if you don’t drive often.
7. Is Usage-Based or Pay-Per-Mile Insurance Right for You?
If you’re a low-mileage driver, you might benefit more from usage-based insurance (UBI) or pay-per-mile insurance compared to a traditional policy. These types of policies are ideal for drivers who don’t drive frequently or for long distances.
Usage-Based Insurance (UBI)
- How it works: UBI policies use telematics devices to monitor your driving habits, including mileage, speed, braking, and driving time. Safe and low-mileage drivers can benefit from lower premiums.
- Best for: Drivers who drive occasionally and exhibit safe driving behavior.
Pay-Per-Mile Insurance
- How it works: Pay-per-mile insurance charges you a small base rate plus a fee for every mile you drive. It’s an excellent option for drivers who cover fewer miles than the average.
- Best for Drivers who drive less than 7,500 miles per year and want to save on insurance.
Both of these options can result in substantial savings for low-mileage drivers, but it’s essential to compare them with traditional policies to determine the best fit for your driving habits.
Conclusion
Mileage plays a significant role in determining your car insurance premium. The more you drive, the higher your risk of accidents, which translates into higher premiums. However, if you’re a low-mileage driver, you can benefit from discounts and savings by reducing your mileage or switching to a usage-based or pay-per-mile insurance policy.
To lower your premium, be sure to provide an accurate estimate of your annual mileage, explore low-mileage discounts, and consider reducing your driving by carpooling, using public transportation, or working from home. By managing your mileage and choosing the right insurance policy, you can save money while maintaining the coverage you need.
