Working from home likely already saves you money on gas, work attire, and lunches out, but it can also help you save on auto insurance. As more companies offer remote positions, telework, or jobs where you can work from home one or more days a week, you could save by informing your current auto insurer or switching plans altogether. The same could be true for those operating small businesses out of their home, deployed members of the military, and college students.
No matter how you run the numbers, fewer miles on the street frequently add up to reduced accident risks and costs. Read on to see if you might qualify for reduced auto insurance premiums by living a lifestyle that requires you to drive less.
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1. Your Annual Average Mileage Decreases
When first enrolling in auto insurance, many companies ask if you drive to work and what your annual mileage is. If you’re no longer driving to work because you’ve started your own business or are working remotely, that mileage will quickly drop in many situations.
Insurers offer these discounts because the fewer miles you travel, the less likely you are to file a claim. For example, if you park your car in a secure home garage most of the time, your car is less likely to be broken into.
Many auto insurance policies typically designate people as low-mileage drivers when they drive between 7,500 to 15,000 miles per year, with each insurer quantifying this threshold differently. All told, drivers that qualify for low-mileage discounts may save up to 30% annually on their auto insurance.
2. Look for Discounts Offered By The Carrier
Now that you’re no longer commuting to work contact your insurer to say you’re now working at home. You can ask directly if you might now qualify for a low-mileage insurance discount. However, not all insurers offer this discount or may not weigh your mileage very heavily in their insurance formula.
If you cannot access a low mileage discount with your current insurance policy, looking into other kinds of auto insurance, such as pay-per-mile or usage-based coverage, may be worth it.
3. Purchase a Pay-Per-Mile Policy
A pay–per–mile (PPM) policy charges you a flat amount plus a fee based on how many miles you drive. This is often accounted for by using an app and/or a device that plugs into your car. A PPM policy might be a good fit for you if you rarely drive or only take the car out for short errands.
For example, you might pay a $2/day rate up front and 5 cents per mile. If you drove 10 miles in one day, you’d pay $2 plus 50 cents (.5 times 10 miles) for $2.50 that day. Other programs may charge a flat rate per month.
This policy may not be available from all insurance companies or in all states. Further, you’ll likely need to shop around for a pay-per-mile insurance policy. Remember that you’ll need to secure an exception or accommodation for the occasional road trip if you plan to take one. Failing to do so could result in much higher than expected rates.
Some drivers may also have privacy concerns about the information collected. That information may also include your locations and driving habits, such as speed. However, this information could ultimately benefit you; pay-per-mile auto insurance is known to reward careful drivers with a safe driving discount.
4. Find a Usage-based Insurance Policy
A usage-based insurance (UBI) policy is typically based on your driving habits plus miles. Your insurer either gives you a device or asks you to download an app that monitors your habits for a period of time or on an ongoing basis. Driving habits that may be monitored by UBI include:
- Miles you drive
- Locations you drive to
- Time of day
- Your speed
- Your braking habits
Because UBI insurance pays special attention to your driving habits, you may pay more for coverage if their detection mechanism senses that you are speeding or breaking hard.
Remember: with UBI, it’s not only the number of miles you drive but how you drive those miles.
Because UBI may not be right for all drivers, it’s best to determine whether this kind of policy may be a good choice before enrollment. If you’re curious, you can use Insure U’s DriveCheck program to see whether UBI is a good fit for you.
5. Reduce Optional Coverages
If you no longer use your car frequently, you might think about reducing or eliminating optional coverages. For example, you might not need the following:
- Rental coverage
- Roadside assistance
- Accident forgiveness
- Pet coverage
Comprehensive and collision coverages are also optional, but you might retain these coverages. Collision coverage pays for damage to your car caused when your car comes into contact with another object, whether another vehicle or a building, even if you’re at fault.
Comprehensive coverage pays for other non-collision incidents such as fire, theft, vandalism, animal damage, and glass breakage. You might think you could reduce comprehensive coverage if your car is stored in a safe place like a garage much of the time. But even then, animal or weather-related damage could still happen. Only drop this coverage if you can pay for repairs or a new car.
6. Opt For a Higher Deductible
Your deductible is the amount you pay before your collision, and comprehensive insurance kick in to cover any damage caused by a collision and non-collision incidents. Generally, lower deductibles equate to higher premiums because the insurer is likelier to pay out when that number is smaller. However, if you want to hang on to optional coverages like collision and comprehensive and still save some money, you may want to consider raising your deductible
According to a recent study, raising your deductible from $200 to $500 deductible could reduce your premiums by up to 30 percent. Further, switching to a $1,000 deductible can save you 40 percent or more. However, this means you must have $1,000 on hand to deal with your portion of repair costs.
7. Find Companies That Offer Low-mileage Auto Insurance
Before shopping for a low-mileage auto insurance option, first, ensure you’re actually driving fewer miles. Take your odometer reading on the first of the month and the last day of the month. Then multiply that number by 12 to get a rough estimate.
As mentioned above, you’ll want to make sure you’re below 7,500 miles or so. Some insurers may allow higher mileage caps to qualify, but it’s good to understand your current ballpark estimate when you call for insurance quotes.
Then, figure out which type of program listed above might make sense for you, and ask the insurer how your mileage might save you money versus a traditional insurance policy. Are there exceptions for road trips and other longer journeys, or would those affect your savings?
Compare the monthly flat rates and per-mile fees for any pay-per-mile program, along with coverage amounts, to ensure you compare apples to apples. Ask how often the insurer assesses your driving habits with any app-or device-based program. For example, does the UBI program only watch your driving habits for a limited amount of time or all the time?
You might find low-mileage policies with insurers such as:
- Safeco
- Allstate
- Metromile
- Nationwide
- USAA
- PEMCO
This isn’t an exhaustive list, so review options with an agent or on your own.