How Does Total Mileage Driven Impact My Car Insurance Rates?
Last Updated on May 18, 2021
Mileage has a significant impact on your car insurance rates. The more time you spend driving, the more chances you have to get into a collision. The more collisions you have, the more claims you make. The more claims you make, the more money your insurance company has to pay.
For all of these reasons, your total mileage will certainly impact your car insurance rates. Car insurance companies calculate their rates based on the average miles driven per year by an ordinary adult.
The typical American adult with a full-time job will drive approximately 8,000 to 12,000 miles per year.
If you drive significantly less than, say, 10,000 miles per year, then you may be eligible for significant insurance discounts. On the flip side, drivers who drive more than 10,000 miles per year may pay more for car insurance.
How Much of a Low Mileage Discount Can You Get?
If you’re retired, or if you work from home, then you may qualify for a significant low mileage discount. Our friends at NerdWallet recently calculated the discounts available through major nationwide car insurance companies for drivers who drive fewer than 5,000 miles per year. Here’s what they found:
- State Farm gives you a 14.3% discount when dropping from 10,000 miles per year to 5,000 miles per year
- Liberty Mutual gives you a 6.4% discount when reducing mileage from 10,000 miles per year to 5,000
- GEICO offers a 6.2% discount for reducing mileage from 10,000 miles per year to 5,000
- GEICO offered an additional 6.8% discount when mileage dropped from 5,000 miles to 2,500 miles
These numbers were based on insurance quotes for drivers in New York and Florida. They’re not standard across the United States. Insurance companies in some areas might not give any type of low mileage discount.
Additionally, different insurance companies offer different low mileage discounts. Some insurance companies, for example, offer small or non-existent discounts to low mileage drivers. Other insurance companies offer steep discounts.
Retired and work-at-home drivers get a discount for reasons beyond just low mileage. These drivers also spend significantly less time driving during high-risk times – like rush hour. There are more drivers on the road during rush hour, which means drivers with a 9 to 5 job are at a higher risk than drivers who work from home or only drive during the middle of the day.
You May Have to Prove your Low Mileage Discount with a Car Tracker
If an insurance company offered a low mileage discount to everybody who asked for it, then the insurance company would quickly be out of business. If you want to claim a low mileage discount, then you may need to prove it with a car tracker.
Your insurance company might request you to install a car tracker for 1 or 2 months, for example, to examine your average driving habits. If you drive fewer than a certain number of miles per month, then you might qualify for a low mileage discount.
Some insurance companies call this usage-based insurance or UBI. Some companies even have a special branded name for their UBI programs: Allstate, for example, bundles UBI into their “Drivewise” program. That program is available to drivers who drive fewer than 12,000 or 15,000 miles per year. Other UBI programs include USAA’s SafePilot, State Farm’s Drive Safe and Safe, GEICO’s DriveEasy, and Farmers’ Signal.
The Insurance Industry is Moving Towards Mileage-Based Policies for Everyone
In the future, everyone might use mileage-based insurance. A growing number of insurance companies are offering usage-based insurance. It’s another way for insurance companies to provide ultra-customized, ultra-specific quotes to customers.
There’s another, more malicious reason why insurance companies are promoting usage-based insurance: it’s because it makes it harder for customers to compare quotes between insurance companies and make the switch. Today, it’s easy to switch between insurance companies whenever you like. You’re less likely to switch, however, when your new insurance company isn’t offering the same customized rate, or when you have to install a new car tracker in your vehicle and run it for two months.
Conclusion: Compare Car Insurance Quotes Today to Get the Best Insurance Prices
Ultimately, the most important thing to remember is to compare car insurance quotes today. The more quotes you compare, the more likely you are to get the best price on car insurance.
If you’re a low mileage driver, then make sure you find a car insurance company that rewards your low mileage habits. If you drive fewer than 12,000 miles per year, then you should be able to find at least one insurance company offering great deals for low mileage.
Alternatively, if you’re a high mileage driver who drivers more than, say, 20,000 miles per year, then you may want to work with a car insurance company that doesn’t put an emphasis on mileage.
Compare car insurance quotes today to find out how mileage impacts car insurance rates in your region.