Question: At what point does the yearly mileage that I put on my car impact my insurance premiums?
Answer: Some car insurance companies offer discounts to motorists who drive fewer miles. As mileage rises, at a certain point -- it differs from company to company -- you no longer qualify for a discount, which means your rates go up.
There isn't an insurance industry standard that says if you drive over X amount of miles your rates will be higher.
Car insurance premiums in many instances are, in part, set by the information you provide about your vehicle – such as the purpose for it (pleasure, commuter, for work, etc.), how often you drive (to work or to school daily or if it is just a weekend car), and how many miles you put on the car each year. So mileage is just one part of the rating factors that an insurance carrier will take into account.
For example, some insurance companies’ cutoff for discounts is 15,000; others are much lower at 7,500 and under. How you get the discount varies, too. With some insurance companies you just estimate the mileage you put on your car each year. Other car insurance providers may offer you a discount only if they track your annual mileage.
For instance, GMAC Insurance (now known as National General Insurance) offers a low-mileage discount to OnStar subscribers in 35 states. This is a pay-as-you-drive (PAYD) discount that makes use of telematics technology within the Onstar device. If GMAC finds that you drive less than 15,000 miles a year, you can quality for a discount, which may be anywhere from 10 to 50 percent.
There are other insurers that offer usage-based insurance (UBI) plans that track your mileage and driving behavior with a telematics device and offer you discounts. See our roundup of current PAYD plan offerings to determine if any would work for you.
Analysis by the Consumer Federation of America (CFA) indicates that drivers could save an average of 5 to 10 percent on their car insurance rates if they reduced their annual mileage. They found if you drive less than 10,000 miles annually, you could see savings of about 5 percent on your premium. Less driving means less exposure to situations that could result in an accident. This results in fewer claims and encourages insurers to lower rates.
You will need to ask your insurance company about their specific rating rules regarding this issue. Also, when you are shopping around for insurance you can ask if they discount rates for 10,000, 12,000 or even up to 15,000 miles per year. Don’t be afraid to try out a PAYD plan. The savings could be great if your mileage and driving behavior please the insurer.
Asking for a low-mileage discount may help you determine if you can reduce your auto insurance rates enough to make carpooling or mass transit worth the time and effort.