Benefits of Sharing Your Mileage With Your Insurance Company
Unlock potential car insurance savings by understanding how your actual driving behavior can lead to more personalized rates.
Sharing your vehicle’s mileage with your insurance provider offers a personalized approach to auto insurance. This is part of usage-based insurance (UBI) or telematics programs, which gather data on how and how much you drive. Participation can align premiums more closely with actual driving habits and vehicle usage, moving beyond traditional rating factors for a more equitable and tailored experience.
Understanding Mileage-Driven Insurance Programs
Usage-based insurance (UBI) or telematics programs calculate auto insurance premiums using technology to collect data on vehicle operation and driver habits. The core principle is to base costs, in part, on actual driving behavior rather than solely on broad statistical categories like age, location, or vehicle type.
Data collection occurs through several methods. Many insurers provide a device that plugs into the car’s On-Board Diagnostics (OBD-II) port, typically under the dashboard. Alternatively, smartphone applications leverage GPS and motion sensors to track data. Some newer vehicles also have built-in telematics systems that transmit information directly to the insurer.
Programs fall into two categories: “pay-per-mile” and “pay-how-you-drive.” Pay-per-mile programs base premiums on distance driven, often charging a base rate plus a per-mile fee. “Pay-how-you-drive” programs consider mileage but also incorporate a broader range of driving behaviors to assess risk. Both aim to reward drivers for habits that reduce accident likelihood.
Direct Premium Reductions Based on Miles Driven
A direct benefit of sharing vehicle mileage is premium reductions based on miles driven. Fewer miles on the road translate to reduced exposure to accidents and claims. Drivers with lower annual mileage typically qualify for more favorable insurance rates.
Vehicles driven less frequently spend less time in traffic and are less likely to be involved in a collision. Drivers logging under 7,000 to 7,500 miles annually are often considered low-mileage drivers. The average American driver covers approximately 13,476 miles per year, but maintaining mileage below this threshold can lead to savings.
Insurance companies use mileage data from telematics devices or smartphone applications to calculate reductions. This data allows them to apply discounts reflecting an individual’s lower risk profile due to reduced road exposure. For example, driving under 7,500 miles annually can save a driver around $86 per year on standard coverage. This highlights how driving less can lead to savings on auto insurance premiums.
Further Rate Optimization through Driving Data Analysis
Beyond tracking miles driven, telematics systems analyze driving behaviors to optimize insurance rates. These programs provide insurers a clearer view of a driver’s risk profile, allowing for additional premium adjustments. Data points often include hard braking, rapid acceleration, and adherence to speed limits.
Time of day also contributes to the analysis, as driving during peak hours or late at night presents different risk levels. Some advanced telematics systems monitor phone usage while driving and smoothness of cornering for a detailed assessment. This analysis allows insurers to identify and reward drivers who consistently exhibit safe practices.
Demonstrating responsible driving habits can lead to greater savings or additional discounts beyond those based solely on mileage. Many programs offer an initial enrollment discount, often between 5% and 10%, with further savings up to 30% or 40% for sustained safe driving. This personalized feedback can also empower drivers to modify habits, leading to safer roads and financial benefits.