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Auto Insurance

Annual Mileage: How it Affects Your Auto Insurance

Driving fewer miles can lower your car insurance rates. If your driving habits have changed and you are now driving less, learn if you are eligible for further reduced mileage-based discounts and perks.

Annual Mileage How it Affects Your Auto Insurance

Annual mileage is the number of miles you drive yearly, which can significantly impact your auto insurance rates. Most insurance companies offer low-mileage discounts to those who do not put a lot of miles on their vehicles. Insurance companies figure that if you’re not on the road very much, you have a significantly reduced chance of getting in a car accident or having a claim on your car.

On the flip side, if you put many miles on your vehicle, you’re more likely to have an accident, which means you’ll pay more for auto insurance.

Why Is Annual Mileage Important?

When you apply for auto insurance, the insurance company will ask you several questions to try and gauge your driving habits. They get a rough idea of your risk level on the road by looking at your daily mileage, age, driving experience, and past driving history.

To calculate your annual mileage, you do not have to track exactly how much you drive – an estimate is usually good enough. Most people can determine their daily mileage by determining how long their work or school commute is, then tack on some additional miles for errands and side trips and come up with a reasonable estimate.

Some insurance companies may request a photo of the car’s odometer, while others may not. However, if you report a very low number of miles, it might trigger suspicions of “soft fraud.” Your insurance company might ask you to report your mileage throughout the year to prove your low mileage claims.

How Does Annual Mileage Affect Insurance Rates?

Annual mileage directly affects your insurance rate. The more you drive, the more risk you face and the higher your insurance rates.

The Federal Highway Administration estimates that the average driver in the United States drives around 13,500 miles each year. This number is averaged across the United States and includes all ages and genders. You might find that your state has a different average, affecting what your insurance provider considers low mileage.

Driving 10,000 annual miles or less is generally considered low mileage and might qualify you for a discount. Again, this depends on where you live and other factors related to your driving habits.

Driving fewer than 7,000 miles a year generally earns a discount and can qualify you for a pay-per-mile or telematics insurance plan which can be significantly less expensive.

Why Should I Keep Track of My Annual Mileage?

It pays to keep track of your mileage if you think you might be in the 7,000 annual miles or less category.

Pay-per-mile car insurance can give you a significant discount over traditional car insurance. This policy has a low monthly rate and additional charges based on the number of miles you drive. Most insurance companies offer a discount between 5-10% to those who sign up for usage-based policies.

If you’re interested in pay-per-mile insurance, your insurance company will keep track of your mileage by monitoring your vehicle. These monitors sometimes check your driving habits and might help you get a safe driving discount.

How Low Annual Mileage Drivers Can Save Money on Auto Insurance

If you qualify for low-mileage auto insurance, you may be able to save more money than you thought. Differences by state can play a significant role in insurance rates, meaning discounts happen on a case-by-case basis.

What Do Insurance Companies Consider Low Mileage?

Research your state to see what your regional low-mileage limits are. Almost all insurance companies consider less than 20 miles per commute to fit into the low-mileage category, but there are other factors to review. Living in a densely populated area can work against you. Driving a lot on the weekends can also be an issue if it raises your mileage above 10,000 miles per year.

If you are driving significantly less than 10,000 miles per year or in the 7,000 or fewer miles category, your insurance might offer a pay-per-mile plan. These plans are not offered everywhere or by every insurance company.

How Can I Calculate Annual Mileage?

One way to calculate your annual mileage is to check what your odometer is now and what it read when you bought the vehicle. The odometer reading should be on the title if you did not buy it new. Subtract the miles when you purchased the vehicle from the miles on the car today and then divide by the years you’ve owned the vehicle.

For instance, you bought a vehicle in 2018, and it’s 2023. The car had 20,000 miles on it when you bought it, and today, the odometer reads 80,000. That means you’ve put 60,000 miles on your vehicle in the five years you’ve owned the car. Divide 60,000 by five, and you come up with 12,000 miles each year. This puts you roughly at the average mileage and will not qualify for low-mileage discounts.

If you do not have a car yet or your vehicle is new, add up your commuter miles to and back for the week, then estimate how far you drive weekly to run errands, go to the gym, visit friends, etc. Multiply your weekly estimate by 52. Then consider trips you make in your vehicle; maybe you do a day trip once a week and a big trip every winter. Add those miles to your total for an estimate.

Your insurance provider may ask for more than an estimate to track mileage. They can request photos of your odometer, require you to install a device in your car that monitors your miles, or ask you to use an app on your phone that tracks miles.

What Are Commuting Miles and How Do They Affect My Car Insurance Rates?

Commuting mileage is the number of miles you drive to work and back home. For low annual mileage, many insurance carriers allow up to 20 miles one way; if you travel more than that, you will have a higher insurance rate.

Consider that there are an average of 260 working days in the year, at 20 miles to work and 20 miles home; that’s 10,400 commuter miles a year. Add in trips to the grocery store and other errands, and you quickly hit the average miles driven yearly.

If you’re commuting 40 miles a day, you will not qualify for low-mileage discounts. If you’re commuting more, you can expect higher rates than someone who does not put on that many commuter miles.

What Can I Do if I Drive More Than My Allotted Annual Mileage?

If you have a standard insurance plan and drove more than you thought you would, there is no problem. Traditional plans do not have mileage limits; they expect that sometimes you’ll drive a lot and other times you will not.

If you qualify for a low-mileage discount and exceed the limit, you will no longer be eligible.

Pay-per-mile plans charge you by the mile, so you’ll have to pay for those additional miles. The catch is that these plans are available to people who drive 10,000 miles or less; in some cases, it’s 7,000 miles or less. If you exceed that total, you will no longer qualify for a pay-per-mile plan and will have to switch to regular auto insurance.