If you drive less than the average person, you may be able to save big money on your car insurance. This is because many auto insurance companies offer some form of “low-mileage” coverage that can cost far less than a standard policy.

A Typical Car Insurance Policy

When you buy a regular insurance policy, auto insurance companies assume that you drive around the average amount for a person in your location and age group. The national average for driving is about 12,000 miles per year, or 1,000 miles per month. If you do not drive this much (and below the average) then its possible to not pay full price for car insurance as you are a lower risk than the average driver for filing a future claim. By reducing this risk exposure you should be rewarded with lower premium costs. However, auto insurance companies will not know you drive less unless you tell them; if you simply take out a policy, the assumption will be that you drive as much or more than the average driver.

How much you actually do drive determines what type of low-mileage discount is appropriate for you

Different low mileage customers have different driving patterns and may not all qualify for every type of discount. Your company may make distinctions between low-mileage customers based on how customers drive as much as the frequency of their driving. Here are some common types of discounts available for low-mileage drivers, with an explanation of how these discounts are calculated. You can see which ones are appropriate for your situation and discuss them with your insurance agent.

1) Regular Policy with a Low-Mileage Discount

If you know that your driving has recently decreased dramatically, then you may be able to have premiums discounted based on your new mileage. This solution is most appropriate for those who have retired or who now do not drive for medical reasons. In general, auto insurance companies are happy to discount your premiums if you can show that you truly are driving less. Many providers ask you to “prove” your mileage on a periodic basis. This may be done electronically with an on-board device, or it may require you to drop by the agent’s office so they can look at your odometer.

2) Discounts for Variable Mileage

If your mileage varies greatly from one six-month renewal period to another, a pay-as-you-go strategy may be more appropriate. Pay-as-you-go refers to one of a number of different types of policies available from major insurance carriers that figures your premium based on how much you actually drove the past six months. These policies have a base price that does not change even if you do not drive at all, but increases are only figured on the mileage traveled. In other words, if your base price is $300 every six months for liability, you might pay $350 if you drove 2,500 miles in that six months and $400 if you drove 3,000 miles. Variable miles is often part of an electronic surveillance method of calculating mileage; an onboard device hooked up to the dashboard records your mileage and transmits this information to the insurance company.

3) Storage Policies

You should never take out a regular insurance policy on a car that is in storage. For one thing, the coverage is not matched well to your needs; you should focus far more on protecting the car from vandalism, theft, and fire than from accidents. For another, you will usually pay far more for a regular insurance policy than for a storage policy. Of course, if you ever drive the car for any reason, you must make this clear to your insurance company or risk losing your protection. Some policies allow a limited amount of mileage to move the car or run it briefly to keep engine parts in good shape. You can usually convert a storage policy to regular policy if you decide to begin driving the car.

You can calculate your own monthly mileage to determine if a low-mileage policy would work for you. Some people who work close to home can benefit from low-mileage policies even if they drive every day. If you have a low-average-mileage policy, you may even be able to take the car on short vacation trips and still qualify for the low-mileage discount if you do not drive it much at home. Talk to your insurance agent to determine the exact requirements of a low-mileage discount for your policy.