Fewer miles means a lower premium

Save on Auto Insurance by Driving Less

by Tiana Bodine

From car-pooling and public transportation to telecommuting and bicycling, Americans are always looking for ways to stay off the road to cut down on gas usage. Indeed, according to a study by the Colorado Public Interest Research Group Foundation, mileage has decreased steadily since the new millennium. Young people are leading the trend; from 2004 to 2009, annual mileage for drivers between 16 and 32 dropped by 23 percent, and it continues to go down.

There are plenty of reasons to drive less. It saves on gas, reduces your carbon footprint, and promotes fitness by encouraging people to walk or bike to their destinations. What many drivers don't realize is that a reduction in annual mileage can translate to hefty savings on car insurance as well.

Insurance companies calculate their premiums by assessing a driver's risk, and the more time a person spends on the road, the higher his risk of being involved in a collision. Insurance companies assume that drivers will average around 10,000 miles a year and base their premiums on this estimate. People who drive substantially fewer annual miles are in a lower risk category and qualify for discounts because of it. In order to take advantage of these discounts, you will need to contact your insurance company and explain your driving situation. Be prepared to provide proof of employment if you work from home or are unemployed; also be ready to submit annual odometer readings so that the insurance company can verify your low mileage.

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If it's available from your insurer, you can get an even deeper discount by enrolling in a usage-based auto insurance policy. This type of insurance is assessed on a monthly basis and charges you based on the actual miles that you drive rather than an annual projection. In order to enroll, you will need to obtain a device from your insurer that will monitor your driving habits and report back to the company. The device usually connects to your car's OBD II port and tracks your mileage as well as other driving behaviors like braking and sharp turns. Progressive pioneered this type of policy with its Snapshot program, but other insurers have begun to follow suit. Allstate calls its usage-based insurance program DriveWise, and State Farm calls it Drive Safe and Save. Regardless of what it's called, usage-based insurance can save you anywhere from five to 30 percent for something you're already doing, which is driving safely and infrequently.

Usage-based auto insurance is not offered by all insurers, and not all states support every program. Even if you don't qualify for a usage-based policy, you should still be able to negotiate a rate reduction with your insurer if you have low annual mileage and avoid driving during peak commuting hours. If you're already limiting your driving to save gas or reduce your emissions, this is a free reward for your behavior. If not, the insurance discount might be exactly the incentive you need to start using public transportation or biking to work.

Reviewed December 2017

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