A wide range of factors determine your car insurance premium. These factors include things beyond your control, such as your age or gender. But you can influence a few, including your driving record, credit rating, and annual mileage.
When you think about it, it makes a lot of sense. The more you drive, the more opportunity there is to have tickets and accidents. If you get either one, it costs your insurer money. Because of this, you’ll likely receive higher rates if you drive more miles per year. Some insurers will look at your commute, while others assess how often you’re on the road.
In this article, you’ll learn how insurers use car mileage as a rate factor. We’ll tell you about pay-per-mile or usage-based insurance companies and how they differ from regular insurers. Finally, we’ll answer a few common questions about how insurers use mileage as a car insurance rate factor.
Why Insurance Companies Use Yearly Mileage
Your car’s annual mileage is a major rate factor. Insurers look at this metric because it can help them predict your overall risk of filing claims. When you’re on the road more often and for longer periods of time, there is a higher chance that you could end up in an accident. In other words, there’s more opportunity for error.
Insurers will typically want to know your average annual miles. But they may want to know how long your commute is. How frequently you drive may also come up. All of these data points help insurers determine your risk and set your rates accordingly.
How Insurers Look at Your Car Mileage
There are several ways that insurers can assess your car mileage. They might just want to look at your average annual mileage. But that’s not the only metric that they may want to see. Here are the common ways that insurers evaluate your car’s mileage:
How Many Miles You Drive Per Year
The average amount of miles you drive per year is one of the stats your insurer will take a look at. Driving more miles on average each year will cause you to pay more for your car insurance. Driving fewer miles per year means you’ll likely pay less for your insurance.
According to Kelley Blue Book, driving 7,000 or fewer miles annually will get you the biggest discount with most insurers. Insurers usually consider this to be “occasional driving.” You may also see insurers call this type of driving, “pleasure use.”
How Long Your Commute Is
A commute is how far you travel between your home and your workplace. Commuting miles are the number of miles you drive to work each day. Commuting to work is one of the major reasons why people drive in the first place. Your insurers know this and will often factor in your commuting miles when assessing your mileage.
Typically, insurers won’t raise your rates unless you drive more than 20 miles to work each day. Insurers usually ask you to disclose this information when you apply for a policy. If you move or change your workplace, you’ll want to tell them so you don’t accidentally pay more than you need to.
You should also note that some providers will factor in the location of your commute. Commuting in a rural area is less risky than if you were to drive through a densely populated city.
How Often You Commute
How many times you commute to work each week may also be something insurers look at. A higher commuting frequency means you’re on the road more often. This might cause insurance providers to raise your rates.
Your Car’s Overall Mileage Normally Isn’t a Factor
You may be wondering whether or not your insurer factors in your car’s overall mileage. Luckily, most insurers don’t consider the number on your odometer. They’re more interested in how often your car is on the road at any given time. Your annual car mileage helps them know how often you’re on the road and how much of a risk you are to get into an accident.
But you should keep in mind that your insurer does consider your car’s age as a rate factor. This isn’t necessarily a bad thing. Older cars usually cost less. With this logic, your insurance may cost less as your car ages. You should be sure to speak with your agent if you have any questions about how your insurer specifically uses your car’s age to price your rates.
What Are Pay-Per-Mile Companies?
There’s an alternative to just buying regular auto insurance like you normally would. Some insurers offer pay-per-mile or usage-based programs. These programs allow you to only pay for the number of miles you’re driving, plus a set low monthly premium.
Pay-per-mile insurance offers the same types of coverage you would normally want to buy. This could mean a liability-only policy all the way up to full coverage. The general idea is that customers will only pay for what they need and nothing more.
This is different than regular insurance. Regular or traditional insurance policies also require you to pay a monthly premium. But your rates are based on several factors about you. Your car mileage is only one part of the conversation in this case. Traditional insurance also focuses on allowing customers to get discounts. An argument against this is that it may be difficult to lower your rates if your driving record is spotty. Even if you’re a safe driver right now.
Which Is Better for Me, Pay-Per-Mile or Traditional Insurance?
With pay-per-mile and traditional insurance both being options, you may be trying to decide which one works best for you. The answer will vary depending on how much you drive.
Here’s why you might choose one or the other:
Who Should Consider Pay-Per-Mile
You should consider pay-per-mile insurance if you don’t drive often. Usage-based insurance will make sure you don’t overpay for your monthly rates. While some traditional insurers will give you a discount for low mileage, pay-per-mile will only charge you for the exact amount you drive, plus a low monthly fee.
Who Should Get Traditional Insurance
Traditional insurance is useful for people who drive a lot of miles throughout the year. This would be someone who commutes to work each day. Just note that if you drive a large number of miles per year, you should make sure you’re getting the best rates available. To do this, you should try shopping around between each company. Gathering car insurance quotes and comparing them can help ensure you’re getting the cheapest possible rates.
Is There a Low Mileage Discount?
Most insurers don’t have an official low mileage discount. But providers generally do reward drivers who keep their miles low each year. Driving between 7,000 to 12,000 miles per year will usually do the trick. Your insurance company will track this either by asking you to report your annual mileage or by having you use a telematics device. These gadgets record your driving habits so you can save more money on your monthly insurance rates.
The exact amount of savings for having low mileage will depend on your insurer. To find out more information, you should speak with your agent about low mileage savings.
Frequently Asked Questions
What mileage is ideal for low car insurance rates?
The best car mileage for your insurance rates is around 7,000 to 12,000 miles each year. Having a little more may not affect your rates. But keeping your mileage within this range will make sure your rates stay low. It might also put you in line for a big discount.
While there isn’t an official low mileage discount, insurers will likely lower your rates accordingly if you drive less. This is because you pose less of a risk. Your insurer will have more information about how much you can save for having low mileage.
Do car insurance companies check mileage?
Your insurer will likely ask you to report your mileage each year or when you apply for your policy. They may also track your mileage with a telematics device. These devices will track your mileage and driving habits so you can get possible discounts.
Some companies will also ask you to provide the number on your odometer throughout the year. This way they’ll know if you’re being truthful about your mileage. Keep in mind getting into an accident will likely reveal your mileage as well.
Why do insurance companies ask how many miles you drive?
Insurance companies ask you how many miles you drive so they can predict your risk as a driver. Driving more miles means you’re at a higher risk to get into accidents. This’ll likely cause them to raise your rates.
How do insurance companies check your mileage?
Car insurance providers might use several methods to confirm your annual mileage:
- Simply asking you
- A picture of your odometer
- Using telematics devices that track your mileage
- Visual inspection by an agent or representative
What happens if I lie to my provider about my mileage?
Lying to your insurance company is never a good idea. They’ll almost always find out. If they discover that you’ve misrepresented something on your policy, such as your mileage, you’ll likely face one or more of the following outcomes:
- Policy cancellation
- Claim denial
- Criminal insurance fraud liability
- Being labeled a high-risk driver