It is the number of miles a vehicle typically travels each year and it is an important indicator in several ways. Auto insurance companies want to know the average mileage per year travelled when they calculate their premiums because the longer a vehicle stays on the road the higher the chance of them getting involved in accidents that will lead to claims. They usually try to figure out what portion of those miles was for commute, pleasure or social purposes too, as commute often means perilous, congested, rush hour traffic.
According to the Federal Highway Administration and Progressive, the average mileage per year is 14,000 in the US. This figure is important in automobile insurance premium calculations because underwriters and actuaries have to work on the assumption that an average vehicle annually travels about that much and that shows the level of traffic exposure and accident risk.
Yearly mileage directly affects car insurance but each company may have their own ways of measuring it and including in their rates. For example, many companies use commute mileage in their calculations and you are likely to pay higher premiums if you commute more each way than a figure set by the company like twenty miles.
There are many factors affecting vehicle insurance costs and several of them are more important than the distance travelled annually. For example, Wyoming motorists drive 24,000 miles a year on average but this state has one of the lowest insurance rates in the country since it isn’t a congested state like California or New York. Contrarily, District of Columbia drivers travel less than 6,000 miles a year on average but they face one of the highest premiums. So, city miles can count more than rural driving.
In the same way, drivers between the age of 16 – 19 are expected to drive only 7,500 miles annually, while drivers between the age of 35 – 55 are expected to travel more than twice that amount. Nevertheless, teenagers are charged the highest automobile insurance rates while the best rates usually go to middle aged motorists.
Normally, vehicle owners are asked to estimate the annual mileage they travel. However, car insurers have ways to make their own calculations and estimations based on things like the commute distance and applicant’s job. Besides, they can check the actual miles covered when there is a claim from vehicle inspection and service records.
Policyholders are unlikely to be in trouble if there are slight discrepancies between the actual miles driven annually and what they declared to their insurers. Still, it would be a soft insurance fraud if they deliberately estimated yearly miles driven in order to get cheaper vehicle insurance or to avoid getting charged more.
If companies were to offer special discounts due to low mileage, they can ask for yearly odometer readings, install a telematics device to report this information back to the insurer or they can even ask the policyholder to install an app on their cell phone.
Normally, car insurers work on mileage brackets and each may have their own levels. For example, 14,000 indicates an average vehicle use, over 20,000 excessive driving and 7,500 infrequent driving habits. So, car insurance rates can change noticeably depending on which bracket you are in, your insurer and state.
These estimates, assumptions and figures can be integrated into vehicle insurance premium calculations. For example, female drivers usually get about 10% cheaper rates and mileage figures offer a good reason for it since men drive on average 6,000 miles a year more than female drivers. In other words, some companies may be using their own proprietary methods to check or estimate the mileage an applicant is expected to drive, based on commute distance, gender, state and job description. Also, other factors like retirement may be taken into account since retired motorists drive 30% less on average.
Usually, motorists need to drive less than 7,500 miles annually to qualify for discounts due to infrequent vehicle usage. Obviously, the savings depend on the company and type of policy they go for. For example, there are purely mileage-based vehicle insurance policies, which calculate premiums per mile. They would probably work out cheaper if the vehicle isn’t driven much. However, typical policies and insurers can offer on average 5% discount based on low mileage and rely on odometer readings.
Pay-as-you-drive policies go a bit more into driving habits, record the time of the day the vehicle is out on the roads, as well as mileage and they require a telematic device installation. Nevertheless, they can offer larger discounts when the device shows safer patterns and lower distances.
Vehicle usage affects its price too since higher miles on the odometer reduces its value. Also, motorists who travel long distances every year may prefer hybrid or electric cars to save on fuel. Each time a vehicle is serviced, its mileage at the time gets recorded and often, auto buyers square up service records with odometer readings.
Any discrepancies can be a sign of trouble. Obviously, a vehicle with a high odometer reading is nearer to the end of its economical use. In the same way, lately hardly ever used automobiles may be a sign of a lemon. Finally, auto lease agreements may have a maximum yearly mileage limit and motorists may be required to pay more to extend the limits usually set around 12,000.