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Low Mileage and Usage Based Discounts
Low-Mileage and Usage-Based Car Insurance Discounts
Insurance rates are based on risk. The lower the risk your auto insurance company believes you present, the lower they will charge you for your car insurance rates.
Under this logic, car insurance companies will often offer:
- Low-mileage discounts – Reduced premiums for annual mileage that falls under a certain cap.
- Usage-based discounts – Savings for good driving habits (monitored by a device you place in your vehicle).
NOTE: Your eligibility for a low-mileage discount may depend on your participation in a usage-based insurance program that tracks both your driving behavior and your mileage.
The definition of “low mileage" varies with each provider; however, the mileage cap typically falls between 7,500 and 15,000 miles per year.
If your annual mileage generally does not exceed this range, you should ask your car insurance company about a low-mileage discount.
When to Ask About Low-Mileage Discounts
Even if you're unsure of your exact annual mileage, you should consider looking into a low-mileage discount if:
- You're a senior driver who is retired.
- Not driving to and from work can equate into less annual miles.
- You move closer to your place of work or begin a home-based business.
- You purchase a second car for running errands.
- When obtaining coverage, be sure your car insurance company is made aware that this is not your primary vehicle.
- You join a car pool, reducing the number of days you drive to work.
You may have to sign up for a usage-based program that tracks your miles and driving behavior in order to be eligible for this discount. Continue reading below for more information.
Usage-Based Programs and Discounts
Usage-based, or “pay-as-you-drive" or "pay-as-you-go," insurance programs refer to programs offered by many auto insurance companies in which you can get a personalized premium by letting the car insurance company review your driving habits. Based on your driving patterns, you may get a discount of up to 50%.
When you sign up for a usage-based insurance program, you'll be asked to attach a small telematic device to your vehicle that monitors:
- How you drive, such as:
- Your average speed.
- How hard you brake.
- How many miles you drive.
- The time of day/night you drive.
Essentially, a usage-based program offers the driver a chance to get a customized discount; the better your driving, the bigger your savings.
In some cases, you may even get a discount for just signing up for the program and installing the device.
Could This Program Actually Increase My Rates?
Your insurance premiums should not increase due to participation in a usage-based program; most car insurance companies say that the program is only used to calculate your discount – not to raise your rates. However, until the program has been study long term, we can not say for certain if telematic information will not be used to raise your rate.
Added Benefits for Parents of Teen Drivers
These pay-as-you-drive programs can be especially beneficial if you are the parent of a young driver. Because the monitoring device in the vehicle records the behavior of the driver and gives you access to the data, you can monitor your teen's driving for any risky habits and correct them before an unfortunate accident occurs.
Qualifying for a Usage-Based Insurance Program
Terms of usage-based programs will depend on your insurance company. Your state will also dictate whether you can participate, as not all states allow these programs.
Additionally, your vehicle will need to meet certain requirements in order to install the telematics device.
If you are interested in a pay-as-you-drive program, make sure you speak at length with your auto insurance provider about the details, requirements, and potential savings.