NEW YORK (MainStreet) – Pay-as-you-drive insurance has become an enticing option for drivers, but does reduced mileage always add up to big savings?
It depends where you live and who's your insurer.
Still fairly new in most states, this performance-based insurance tracks driving behavior through small sensors installed in a car or by an existing on-board communications system. That sensor feeds certain information back to the insurance company. For providers including State Farm and MetroMile, that means strictly counting the miles you're driving. For Progressive's Snapshot program, however, a small wireless device under the dashboard of a car records not just how many miles are driven each day, but how often a vehicle is driven between midnight and 4 a.m. and how often a drivers slams on the brakes. Other insurers including Allstate, The Hartford, Liberty Mutual, GMAC and Travelers have similar programs.
Even with those more in-depth programs, however, mileage plays a huge role in determining premiums.
“It's a really big part of what goes into your rate, because the insurance company figures that the more miles you drive, the more likely you are to get into an accident,” says Laura Adams, senior analyst for InsuranceQuotes.com. “More road time just means more potential risk, so if you're driving less, they'll reward you for that.”
Even without enrolling in those programs specifically, reducing mileage can have a significant effect on a driver's insurance payments. An InsuranceQuotes.com survey this year found that a U.S. driver who drives 5,000 miles a year pays 8.4% less on average than a fellow driver who logs 15,000 a year — and that's just slightly more than the 13,476 the average American drives annually, according to the Department of Transportation.