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Low-mileage and PAYD discounts

To your insurance company, every click of your odometer means you're exposed to bad weather, bad roads and bad drivers.

That's why nearly every carrier on the planet offers some kind of low-mileage car insurance discount.

Those car insurance discounts may take the form of a cheaper base rate, a percentage discount that's spelled out on your declarations page, or some kind of monitoring device.

Low-mileage discounts

Typical discount 5 percent to 15 percent

Available to: Policyholders who drive less than a specified number of miles each year, usually 7,500 to 10,000 miles.

Caveats: Some low-mileage drivers may see savings reflected as a reduction in their base rate.  Discount is typically applied to bodily injury liability, PIP, property damage liability and collision premiums. Some insurers require verification of odometer readings.

Length: Continual as long as mileage is kept low. Some companies may require annual or periodic verification of mileage.

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Read more:  At what yearly mileage driven do your insurance rates go up?

Usage-based insurance / pay as you drive / telematics

Discount varies from zero to 45 percent.

 Available to: Drivers who install a monitoring device from their insurance companies.

 Caveats:  Some auto insurers measure only your true mileage, but others establish their discounts based on information that they receive about your driving style. The monitoring devices can transmit information such as:

  • How many miles you drive
  • What time of day you drive
  • How much and how often you brake
  • How smoothly you navigate turns
  • How rapidly you accelerate

A small (5 to 10 percent) discount may apply for just enrolling in a monitoring program with a larger discount based on your performance as a driver.

The discount (often known as a pay-as-you-drive, or PAYD discount) is typically for the premium related to the three major coverages of bodily injury liability, property damage liability and collision and is usually applied per vehicle, not per driver. It is possible that your driving habits may result in no discount at all. At this time, insurers say they will not use the information relayed to them to raise rates.

Length:  The discount should apply once an initial data-gathering period has passed, typically 30 to 90 days. Some companies ask you to keep the device in the car as long as you are a policyholder. Others require a monitoring period to establish behaviors and set a discount, then ask you to return the device.

Read more:  Pay-as-you-drive insurance plans

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