Question: At what point does the yearly mileage 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.
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, 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 of the rating factors that an insurance carrier will consider.
For example, some insurance companies’ discount cutoff 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 uses telematics technology within the Onstar device. If GMAC finds that you drive less than 15,000 miles a year, you can qualify for a discount, ranging from 10% to 50%.
Other insurers offer usage-based insurance (UBI) plans that track your mileage and driving behavior with a telematics device and offer you discounts. Check out PAYD plans to determine if any 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 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.
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.
— Penny Gusner contributed to this story.
