How Mileage Affects Your Car Insurance Rates
More Americans now work from the comfort of their homes. Instead of spending long hours in heavy commuter traffic, they're crouched in front of computers, hosting Zoom video meetings with their co-workers.
Since they're no longer commuting, some people believe they deserve a break on their insurance premium rates, since they don't drive as much. But can a person receive a cheaper rate if they drive fewer miles on the road? And what discounts are available for low-mileage drivers? You'll learn how your annual mileage affects your auto insurance rates below.
If you are searching for a lower car insurance rate based on how many miles you drive, you can compare quotes using SmartFinanial's online insurance comparison tools.
Why Do Insurance Carriers Ask for My Annual Mileage?
Insurers ask every policyholder for the annual mileage they drive every year. Carriers use the miles motorists drive each year as a rating factor to determine their rates. If an insurer suspects that your mileage is too low or high, it will ask you for regular mileage checks to learn if you're telling the truth.
Tell your insurance company whenever the amount you drive changes. For instance, if you started a new job doing remote work, you will no longer need to commute long distances. When you enter your new annual mileage, enter a new amount instead of relying on the company's default insurance mileage numbers.
If you drive less, you can also sign up for cheap car insurance plans based on your annual mileage, like the pay-as-you-go programs or usage-based discounts.
Do Insurance Companies Always Use Mileage to Determine Your Premium Rates?
Insurers companies don't always rely on annual mileage to calculate their premiums. They use several variables to calculate their premium rates, including a driver's annual mileage and home state. They also base insurance premiums on the risks that drivers face on the road.
For instance, an insurance company may charge higher rates if a person spends more time commuting to work because their extended travel time places them at an increased risk of having accidents.
Other insurance providers may offer rates to people who drive less because they may have fewer traffic incidents. Your residence is another variable that your insurer may take into consideration because different states have regulations that can increase or lower rates.
Your Insurance Rates Will Differ Depending on Your Zip Code
Insurance regulations will also differ depending on the state where you reside. The average rate for low-mileage car insurance was $1,663, according to a study conducted by U.S. News and World Report. Here are two examples of what a typical motorist will pay in separate states.
California Residents: A low mileage motorist in California may have lower premiums because regulations like Proposition 103, a state ballot measure, mandates that insurers consider annual mileage estimates when calculating premiums.
It limits factors that California's auto insurers can use in setting rates, including a driver's safety record, years of driving experience, and mileage driven. Since the Golden State has so many drivers on the road, they charge high-mileage drivers more expensive rates.
California's residents have a rate of $1,489 if they are driving less than 6,000 miles compared to New Jersey residents who pay $1,624. The average Golden State resident who is a low-mileage driver can pay almost $175 less than other motorists nationwide.
North Carolina Residents: In other areas, like North Carolina, mileage doesn't increase insurance rates since the state is mostly rural, and there are fewer motorists on its roads.
The Tar Heel state also has an insurance formula that prevents companies from spiking rates. Individual companies operating within the state must file rate requests with the North Carolina Rate Bureau. This organization then proposes a statewide base premium on behalf of these companies.
The NCRB also places a price cap on how much money insurance companies can charge based on mileage. They don't place limits on how much companies can discount rates for motorists that don't drive much.
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Which States Do Motorists See the Highest (or Lowest) Savings Based on Mileage?
According to U.S. News and World Report, there are five states where people save the most money as low-mileage motorists:
- California - 16.5 percent
- Washington, D.C. – 11.1 percent
- Alaska – 11 percent
- Alabama – 9.8 percent
- Hawaii – 9.7 percent
There are five states where mileage has little effect on car insurance rates. These include:
- North Carolina – 0 percent
- Utah – 1.2 percent
- Texas – 2.5 percent
- Connecticut - 2.8 percent
- Rhode Island – 3 percent
Are you a lower mileage motorist who is paying too much on your car insurance rates? You can use SmartFinancial to compare different insurance companies. You can save money on car insurance by entering your zip code to get a free auto insurance quote. You can find an insurance company that provides lower rates based on your driving profile.
When Should You Enroll in a Mileage-Based Discount Program?
Insurance companies don't offer low-mileage car insurance policies to customers. Instead, they have coverage that provides discounted rates based on the actual average annual mileage.
Others offer end-of-the-year discounts for low-mileage motorists. You can still get a cheaper rate even if you're not sure you qualify for these rates. These discounts are generally available to:
- People who live close to their place of employment.
- Individuals that operate a home-based business.
- Stay-at-home parents.
- Retired seniors who don't have 9-to-5 jobs.
- Secondary cars used that are not the primary vehicle and only used for errands.
- People who carpool to work several times a week.
- People who live close to work.
Two Types of Mileage-Based Discounts
Auto insurance companies generally don't provide low-mileage or usage-based policies to new customers. Eligibility for these incentive programs requires motorists to use a telematics app that tracks their driving behavior and mileage. Insurance companies generally offer two kinds of discounts:
Low-mileage discounts – An insurer may give reduced premiums to drivers whose annual mileage falls beneath a certain limit. These are tiny deductions given at the end of the year for people who are below a certain number of miles.
Usage-based insurance (UBI) – Car insurance companies may offer these savings to their consumers in exchange for safer driving habits. They'll place a monitor in your car to track your driving behavior. This insurance is not the same as low-mileage discounts, which are different.
What Is a Low-Mileage Discount?
Some traditional auto insurance companies offer low-mileage discounts to their customers. It's a small deduction that insurers give at the end of the year to individuals that log under a specific amount of miles.
According to the U.S. Department of Transportation, the average driver less than 13,476 miles per year. It comes out to an average of 1,125 miles per month.
Policyholders generally underestimate (or overestimate) how much they drive annually, so auto insurance companies base their premium rates on the standard national average, which is 12,000 miles.
Car insurance companies have different opinions about who qualifies as a low mileage driver. Most define low-mileage drivers as motorists that drive between 7,500 and 15,000 miles, on average, per year. If your annual travel doesn't exceed 15,000 miles, you should consider asking your insurer for a low-mileage discount.
Low-Mileage Discount Programs
There are a variety of low-mileage insurance options for drivers. Here are several products and services that car insurance companies currently sell on the market. They offer discounts based on how many miles you drive each year.
The United Service Automobile Association (USAA) has an annual low-mileage discount for motorists age 29 and older.
State Farm, American Family, and the Farm Bureau Insurance Companies offer a discount on a driver's car insurance policy if he or she drives 7,500 miles or less on average, each year.
The Commerce Institute has an Annual Mileage Discount for qualified people based on how many miles you drive.
Other auto insurance companies do not advertise their low-mileage discount for drivers, but you may still get one by driving less. These include Farmers Insurance and Nationwide.
Use SmartFinancial's transparent insurance technology platform to compare quotes from these car insurance providers for free.
Just complete our short application after entering your zip code, and you'll receive quotes from different auto insurance carriers within your local area. You could save up to 40 percent on your car insurance rates.
What Are Usage-Based Discounts and Insurance Programs?
Usage-based auto insurance programs generally provide cheaper, customized premiums based upon your driving behavior. The car insurance company will review your habits to see if you qualify for cheaper premiums. If so, you can receive discounts up to 50 percent on your car insurance rates.
How does it work? The insurance company collects information about your driving habits by using a telematics device that attaches to your car. Others use telematics apps you can download to your phone.
It monitors and evaluates the following behaviors, such as:
- Your annual mileage (the number of miles driven on average)
- Your average speed
- How hard you brake on the road
- Distracted driving
- Adhering to the speed limit
- The time of day (or night) you drive
Infrequent and short-distance driving can also lower your car insurance rates. It can also help you get discounted premiums Unfortunately, these cheap car insurance rates aren't guaranteed.
Pay-as-You-Drive Auto Insurance
Are you searching for an auto insurance policy that charges your premiums based upon how much you drive? Consider buying a usage-based insurance policy called pay-as-you-drive (PAYD). These policies offer both comprehensive and collision coverage, but the insurance company will base your premiums on how many miles you drive.
The fewer miles you drive your car, the lower your final premium costs will be. Other names for this car insurance include pay-per-mile (PPM), pay-as-you-go, pay-how-you-drive (PHYD), and mile-based auto insurance.
Many auto insurance companies base fees on the type of car used, measured against the time, distance, place of residence and behavior of a driver. There are several pay-as-you-drive programs on the market. They include:
Allstate's Milewise – This program tracks your mileage using a mobile app installed in your car's diagnostic port. Customers pay a daily rate and a second pay-as-you-drive rate. The insurance provider says it's designed for stay-at-home parents, commuters, retirees and people who work from home.
Nationwide's SmartMiles – This program charges a base rate and a variable rate (cost per mile) that drivers pay as they based on the number of miles you drive. It counts the first 250 miles a person drives in their car per day.
Drivers can speak with an insurance agent to learn more about these products and services.
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Usage-Based Car Insurance Programs on the Market
Car insurance companies have increased the number of user-based insurance programs they offer to customers over the past decade. Here are a few popular ones available on the market:
American Family's Know Your Drive – The usage-based car insurance program can save drivers up to 20 percent. When you enroll, you'll automatically receive a 5 percent discount.
Allstate's Drivewise – Their telematics device tracks how far you drive every day. You can save between 10 and 30 percent on your premiums and earn cashback every six months for your safe driving.
Esurance's DriveSense - This mobile app allows drivers to earn a personalized discount for being responsible on the road. The program can save motorists up to 8 percent off of their policy.
Liberty Mutual's RightTrack - Users can download this telematics app and place a sticker on their windshield. The RightTrack app links to it. These features allow the company to monitor your driving, including how many miles you drive. It uses this data to get users to save up to 30 percent.
Nationwide's SmartRide – With this device, the auto insurance provider tracks nighttime driving, acceleration, hard braking and the miles you drive. You can earn up to 30 percent savings during the life of your auto policy.
Root Insurance – Their app promises to save drivers up to 52 percent based on their record and how much they drive each year.
State Farm's Drive Safe & Save – This app connects with a Bluetooth beacon that the company sends to you after your enrollment. It tracks hard braking, fast cornering, speeding, and quick acceleration. Drivers can save up to 30 percent with the program.
Do you need an insurance company that bases your rates on your miles driven each year? SmartFinancial offers a free online comparison tool to help you compare quotes from different companies. Just enter your zip code to get started.
Could Participation in Low Annual Mileage Programs Affect My Car Insurance Rates?
There are currently no long-term industry studies on how insurers use telemetric information to determine car insurance rates. So far, companies claim they only use analytic data to calculate their discounts and not the insurance rates for their customers.
How Can I Lower my Premium if I'm a High-Mileage Driver?
Unfortunately, auto insurance companies may raise premiums on motorists who drive a lot. Some people may try to fudge their mileage numbers to get a lower rate. Policyholders can get into trouble if they try to change their mileage and usage numbers. If individuals get into an accident, and an insurance company catches them lying about their average annual mileage, it will cost them money.
For instance, let's say a new policyholder lies about annual mileage. The driver claims she only drives an average of 6,000 miles or less, per year, to receive a cheaper premium rate. The car insurance company records the initial odometer reading at 12,485.
Six months later, this person gets into a car accident. The insurance representative returns and records an annual car insurance mileage reading of 29,485 on the odometer. It is far higher than the 6,000 miles per year she claimed she drives. The insurer decides to rescind her savings and charges the original rate.
You don't always need to have low mileage to save money on your auto insurance premiums.
If you drive more than 15,000 average annual miles every year, there are other ways you can lower your car insurance rates. You can do the following the lower your rates if you're a high-mileage driver.
- Avoid getting speeding tickets and traffic tickets.
- Raise your deductible on your coverage.
- Get several quotes when applying for insurance.
Finding the Right Auto Insurance for the Miles You Drive
If you're searching for a fantastic mileage-based auto insurance program, you can trust SmartFinancial to simplify the process. Our transparent insurance platform makes it easy to find a high-quality auto insurance carrier. You won't have to spend hours scrolling through sites to compare quotes from different carriers.
We simplify the process for you. You'll only need to fill out a short application, and we'll provide you with multiple rates from different auto insurance carriers. You'll have the option to buy policies online, over the phone, or in person.
Let us do all the work for you. Just enter your zip code below to get started or call 855-214-2291.
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