Your car insurance rates have always depended partially on the number of miles you drive your vehicle each year. If you drive more miles, you pay more in car insurance. Car insurance logic concludes that the more miles driven, the greater the chances for an accident to happen. Insurance companies lean on studies to bear this out. So, it comes as no surprise that car insurance companies are beginning to find ways to encourage drivers to drive less.
A number of insurance companies now offer a low-mileage car insurance rate for those who drive under 7,500 miles per year. The savings are generally 5 to 15 percent over standard insurance. GMAC Insurance offers a low-mileage plan for those who drive under 15,000 miles per year. Their premium savings are about 54 percent. This kind of car insurance coverage is perfect both for drivers who do not get on the road much and to apply to a secondary vehicle of drivers whose primary vehicle logs the most miles. Under these car insurance coverage plans, you may be hit with fees if you exceed the mileage allowance. It is for that reason that drivers who opt for this sort of policy must read the contract carefully.
One variation on this idea is the installation of a GPS-based device in your car to track not only how much, but how and when you drive. Highway mileage can be discounted, and speeding and night driving charged at a premium. Aided by the device, the car insurance company can calculate the your risks more precisely and charge the you at the actuarial risk per mile in addition to the exact number of miles.
Another approach is “pay-by-the mile” car insurance, usually called Pay-As-You-Drive. In some states, car insurance is available that charges the consumer by the straight mile. Mileage is checked through odometer readings or a GPS-based device. Paying by the mile makes buying car insurance like buying gas – the less you drive, the less you pay Texas became the first state to explicitly allow per-mile insurance in January 2002. Norwich Union, a major U.K. auto insurance company, offers a similar plan. Their figures show that customers who drive less than the norm save an average of 25 percent on car insurance. These new policies reward the consumer for driving less and penalize them for driving more to a greater extent than previous policies allowed. Research indicates that a motivated driver could voluntarily cut the number of miles he travels by as much as 15 percent, ultimately saving him or her money on car insurance.
Whether this sort of plan is right for you can be determined by discussing your situation with your car insurance agent.
