What is a low-mileage discount?

A low-mileage discount reduces car insurance rates by up to 30% for drivers who drive less than 40 miles per day. Keep in mind that a car monitoring device may be required to qualify for a low-mileage discount.

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UPDATED: May 21, 2022

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Written By: Laura BerryReviewed By: Joel OhmanUPDATED: May 21, 2022Fact Checked

Here's what you need to know...

  • Low-mileage discounts require keeping mileage below 12 to 40 miles per day or less
  • Some low-mileage discounts require inserting a monitoring device into your vehicle
  • Low-mileage discounts and pay-as-you-go discounts are often one and the same

A low-mileage discount is one simple way to save money on your car insurance. Not all providers offer such a discount, but there are companies willing to discuss the price you pay for your car insurance policy using the low-mileage discount. There is also car insurance for low-mileage vehicles, so be mindful that you don’t mix up the two.

You already know the rates you pay for your insurance premium are largely factored by the risk each driver, vehicle, and situation presents.

When it comes to low-mileage discounts, they work best for low-mileage drivers who aren’t going far, putting miles on their car, or spending time on the road.

Driving fewer miles makes those drivers less of a risk. The lower you fall on the list of high-risk factors, the less you pay for insurance.

Most companies offer one of two different categories when comparing rates, which is why it’s imperative you learn the difference between low-mileage car insurance discounts and usage-based mileage discounts while you’re comparing premiums.

Compare car insurance quotes today to find the company that’s right for you. You could save hundreds of dollars a year by switching providers. Enter your zip code into our free comparison tool above to get started.

How do low-mileage discounts work?

Low-mileage discounts are offered to drivers who don’t drive many miles each year.

There is no real rule as to how and when you can drive all your allotted miles throughout the year. You just can’t exceed a certain number of miles each time your policy is renewed if you want to qualify for this discount.

The amount of the discount differs based on the insurance company that offers the discount, which means you’ll want to ask what percentage or dollar amount the discount is when you’re shopping for insurance.

The premise is simple. You and your insurance provider will discuss the number of miles you drive each year.

The negotiation process works much like a leased vehicle purchase. As long as you keep your annual mileage under the approximate 12,000 miles per year, you don’t pay any fees with a lease.

If you keep your mileage at or below the number you discussed with your provider, you get a discount on your premium. You can drive all those miles in one month and never drive again the rest of the year, or you can disperse them equally throughout the year. It’s your choice.

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What are usage-based mileage discounts?

Usage-based mileage discounts are a little different in the eyes of different insurance providers. Rather than providing you with a discount based on how few miles you drive, your provider gives you a discount based on how many miles you drive each day, week, month, and year.

Not all companies offer usage-based insurance, but some do. You can get this discount if you are willing to drive with a device in your vehicle that monitors your habits.

When the device reports you driving very little to the insurance company, you’re given a discount on your insurance policy.

It’s different from the low-mileage discount because you’re getting this discount each month rather than it being immediately tacked onto your premium for the year. There’s a downfall to this form of savings, too.

These devices not only monitor the number of miles you drive for a discount, but they also monitor the following:

  • Driving speeds
  • Braking speeds

If the device decides you brake too hard or drive too far, your insurance provider has the right to raise your premium that month.

The savings here can be substantial, but it takes only one bad driver pulling out in front of you to make it appear you are a much riskier driver.

While a usage-based insurance program is not quite the same thing as a low-mileage discount, it is a discount for people who do drive fewer miles. It’s known as a pay-as-you-go policy, and it often allows you to drive anywhere from 12 to 40 miles per day depending on the company you work with.

Be sure to ask about the number of miles you’re permitted to drive each day if you want this discount.

Which drivers will end up saving the most money?

There is no right or wrong way to drive fewer miles or become a good candidate for this discount, but there are a few drivers who get the most out of a policy of this nature. Retired drivers tend to drive a lot less than those who do go to work each day.

They also get a discount for being retired from some insurance companies, which means they might get to double up on the policy discounts.

Drivers who live and work downtown or within a mile or two of their own office also spend very little time in the car. If you work downtown and live downtown, you might find this kind of policy discount works for you.

Even if you don’t live close to work, but you use public transportation because it’s faster in cities such as New York, you can get a low-mileage discount.

Work-from-home employees and/or business owners also take advantage of discounts like this when they have the opportunity.

It’s easy to get a discount when you’re at home all day for work and for your home life, and it’s becoming easier each time supermarkets and major retailers offer faster shipping and delivery services to people at home. It means less time spent in the car and more money.

Is a low-mileage discount worth it?

It’s the question many drivers ask. There’s no right answer, but there are some considerations. If you truly drive fewer than the miles allotted each day by the insurance company you choose to purchase a policy with, you can save significantly.

If you push it close to that mileage, you risk going over and paying a lot more for that overage than you would to just avoid the low-mileage discount completely.

If you decide on the pay-as-you-go option and have your mileage recorded through the use of a device, it’s imperative you remember every move you make in the car is recorded.

If you are late twice in one week and tend to drive a little fast those days or brake hard those days, you appear to be a bad driver. Your rates could go up, and it’s all for nothing.

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How to Find other Discounts When You Shop for Car Insurance

The best way to save with a policy like this is to look around and compare more than just the premium when shopping for a policy. Sometimes it’s not the lowest dollar amount that equates to the biggest savings.

Sometimes the discount is a little smaller, but the miles are a little more lenient.

Once you find a policy that works for you, go ahead and keep track of your miles and enjoy that discount. If you don’t qualify for this type of discount thanks to your driving habits, there are other ways to save money on your car insurance.

The Bottom Line

Most insurers don’t offer low-mileage car insurance. The term “low-mileage car insurance” is a bit of a myth, because most popular insurance companies won’t base your monthly premium on mileage alone. You can search for auto insurance discounts for low mileage, and that will turn up more results. There are both discounts for low-mileage vehicles, and car insurance discounts for low mileage, which means you don’t drive a lot.

If you are only temporarily working from home and are expected to return to work within a few weeks or months, it may not be possible for auto insurance providers to offer a discount on insurance costs for such a short period of time.

Safe drivers in select states could save money on their insurance coverage with a safe driver discount as well. Just keep in mind that if you’re searching for low-mileage auto insurance discounts, you have the correct discount in mind and you understand you may be asking quite a few different companies.

One way to save is to find the insurance company that offers you the lowest rate for the coverage you need. Enter your zip code below to start comparing quotes today.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

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