Low mileage car insurance

People who spend more time on the road and cover more miles are likely to have to pay more for their car insurance. That’s because their risk of being involved in an accident increases as they drive more miles. So what about people that aren’t on the road much? As you might expect, all else being equal, those that drive fewer miles are likely to pay less. If your car’s mileometer only creeps up by a few thousand miles each year, read our guide to find out about your low mileage car insurance options.

What is low mileage car insurance?

Low mileage car insurance is a specialist type of insurance designed for people that don’t drive very far each year. Typically, the fewer the miles you clock up in your car, the smaller the chance of you being involved in an accident. Thus the lower your insurance risk.

Specialist low mileage insurance recognises this. It promises cheaper premiums in exchange for keeping distances down.

What are insurance mileage bands?

Most insurers use annual mileage “bands”, or brackets, as part of their underwriting criteria to help assess your risk.

When you get a quote, you’ll be asked to estimate your annual mileage. The band your estimated mileage falls in will represent a certain risk and affect your premium accordingly.

The size and level of each band will vary between insurers. For example, the first band may start at 0-4,000 miles, and go up in increments of 1,000 or 2,000 miles. The band sizes may increase again when you hit a certain level – 20,000 miles, for example.

What is considered low mileage for car insurance?

Each insurer will have its own guidelines about what it considers “low” annual mileage. That said, the latest Department for Transport figures on average annual mileage help set a benchmark. In 2019, the average driver in England clocked up 7,400 miles.

Some insurers may consider anything below this average as low mileage. Others might have more restrictive limits.

Before plumping for a low mileage policy, check carefully to see what an insurer classes as low mileage to see whether you qualify or not.

How much difference does mileage have on the cost of car insurance?

It’s near-impossible to answer this question at a general level, because mileage is just one of many factors that can affect your premium. Many of them may have a bigger impact than mileage, such as such as your age, location and driving history, as well as the make and model of your car and its value.

Generally speaking, the lower your mileage, the lower your premium is likely to be. But even if your mileage is low, you might still end up paying more than someone that racks up the miles if other factors make you a higher risk than them.

For example, a 21-year-old driving 3,000 miles a year might well pay more to insure the same car than their 50-year-old parent, living at the same address, who puts in 20,000 miles a year. That’s because the 21-year-old’s age and relative inexperience may count against them more than their low mileage counts in their favour.

What are the different types of low mileage policy?

You have a few specialist options as a low mileage driver, depending on the car you own. These include:

• Telematics insurance. Having a small device or “black box” fitted to your car will monitor and record the distance you travel, as well as your driving habits. Sometimes, either you or an insurer will set your mileage limit based on your estimate. You may need to pay more if you exceed this limit. You’ll be rewarded for safe driving, which includes not driving too far.
• Pay-as-you-go (PAYG) insurance. With mile-based PAYG insurance, you typically pay a fixed annual or monthly fee to cover the car against theft or damage while it’s parked. You then pay a per-mile rate to cover the miles driven each month. This is usually tracked using a black box tracker that you install in your car, but it only tracks your distance and not your driving habits.
• Classic car insurance. This is designed for owners of older cars that are mainly used for leisure and don’t clock up many miles. Some classic car policies specify a maximum annual mileage.

What does low mileage car insurance cover?

Low mileage car insurance covers the same risks as regular car insurance. You can choose between third party, third party, fire and theft, and comprehensive cover. Plus, you can add on any optional extras you want, such as breakdown or legal expenses cover.

Who can benefit from low mileage car insurance?

Beyond the blindingly obvious broad category of “people who don’t drive many miles”, drivers that should certainly take a look at dedicated low mileage policies include:

• Students that only drive when they’re home for the holidays
• Employees that live close to work or are able to ride-share with a colleague
• People that don’t need to commute and only drive occasionally
• Those looking to take out a policy on a second car
• Classic car owners

Does low mileage insurance cost less than standard car insurance?

As is often the case (sorry), it depends. If you are certain you’ll only drive a few thousand miles each year, then insurance designed specifically for low mileage customers could well work out cheaper.

If, on the other hand, you commute a fair distance daily, or regularly drive long distances, you’ll likely be better off with a standard policy.

But your mileage may vary (boom boom). So even if you know your mileage will be low, compare both options rather than assuming a low mileage policy will be cheaper. And bear in mind that if you drive further than expected, the cost of exceeding any mileage caps or building up those per-mile fees on a low mileage policy could end up setting you back more than you expect.

If keeping the miles down isn’t a viable option for you, there are other ways to keep insurance costs down. These include increasing the security on your car, paying for your policy annually rather than monthly, or increasing your voluntary excess. And, of course, shopping around to get the best car insurance deal.

How the distance you drive can affect your car insurance premiums

We gathered quotes for a 40-year-old Bristol-based teacher with a clean driving history and 5 years of no-claims bonus, using a Peugeot 208 to commute to school every day.

We ran quotes both on a price comparison site, which included telematics but not specifically pay-per-mile policies, and also with a specialist pay-per-mile insurer. Our quotes were based on our teacher driving either 4,000 or 10,000 miles per year.

Both quotes show the substantial difference that putting in extra miles can make to your insurance premium. That extra 6,000 miles would add at least a third to our teacher’s insurance costs.

It also illustrates why opting for a pay-per-mile policy is well worth considering for low mileage drivers. The specialist low mileage policy quote was similar to the lowest price comparison site quote. Plus, if our teacher had ended up driving less, they’d have paid less by the end of the year.

But in the 10,000 mile scenario, our teacher would have paid £130 more for the pay-per-mile policy. If you put in a higher-than-average annual mileage, it’s probably not worth the faff of getting quotes for specialist pay-per-mile policies.

How can I estimate my mileage?

Unless you closely monitor your mileometer, you might not have a clear idea of how far you drive each year. And if you’re taking out car insurance for the first time, or you know your driving habits are about to change, estimating your mileage could feel like even more of a shot in the dark. But working out your average mileage might not be as hard as you imagine.

• If you’ve been driving a few years, you should be able to check your current and previous MOT certificates or the records from your car’s services. These will include your vehicle’s mileage on the date it was tested. Assuming your driving habits have stayed fairly consistent, this should let you work out your average annual mileage pretty accurately.
• If you’re starting from scratch, things will be a little trickier, but not impossible. While you can’t predict every journey, start by adding up the likely mileage for regular journeys such as commuting to work, or regular visits to relatives. Then allow a bit extra for the odd UK holiday, plus trips to the shops and the like.

How can I reduce my annual mileage?

Making some simple changes to how and when you use your car may work in your favour to lower your annual mileage. Consider the following changes:

• If you use your car to commute to work or university, can you car share or set up a rota where the driving is shared and halved?
• Can you cycle or use public transport to get to and from work or university, even if it’s just for part of the week?
• Can you walk instead of drive for errands close to home? Or perhaps cycle?

These small changes could have big results in lowering your mileage over the year, and therefore your premium. Not only that, but you’ll need to pay less for fuel too.

Pros and cons of low mileage car insurance

Bottom line

Typically, if you’re a low-mileage driver, you’ll pay less than you would if you racked up the distance every year. If you only drive a few thousand miles annually, specialist low-mileage car insurance policies are well worth a look. Bear in mind, though, that mileage is only one of many factors that play into car insurance premiums. Always shop around, and check our full guide to cheap car insurance for more ways to save.

Frequently asked questions

• Is regular car insurance cheaper the fewer miles you do?

  Assuming all other risk factors (such as location, driving record and the car itself) are the same, then an individual is likely to pay less for car insurance for doing fewer miles. It may depend on whether reducing the number of miles puts you into a different mileage band with that insurer, though. For example, if its lowest band stretches from 0 to 4,000 miles, and the next band is from 4,001 to 6,000 miles, you may see no reduction in premium for cutting your mileage from 3,500 to 2,000 miles. But if you were to cut your mileage from 5,000 to 3,500 miles, then your premium might go down.

  It’s also worth checking out specialist pay-per-mile insurance policies, as these may work out cheaper for low mileage drivers than regular insurance.

• Can insurers check my mileage?

  If you have a telematics insurance policy, the black box tracker that’s fitted in your car will measure how far you drive and send details back to the insurer.

  If you have a standard insurance policy, insurers won’t be able to check how many miles you are currently driving without asking you. However, they can check your MOT history, which states your mileage each year, to see if your estimated mileage matches previous official records.

• Why do car insurance companies ask about your annual mileage?

  Logically, the less distance you drive, the lower the risk of you having an accident. The lower the risk of an accident and, therefore, of insurers having to pay out for a claim, the lower an insurer will set your insurance premiums.

• Can I increase the mileage stated on my car insurance policy?

  Yes. If you realise part way through your insurance period that you’re putting in more miles than you estimated – perhaps because you’ve changed jobs and have a longer commute – then not only can you tell your insurer, but you should do. It might bump up your premium a bit. However, it will also make sure you don’t run into any thorny issues if you need to claim and your insurer notices that your mileage is higher than you originally estimated.

• Do I need business car insurance to claim mileage expenses?

  If you’re claiming mileage expenses, this suggests that you’re using your car for work reasons other than your regular commute. If this is the case, you need business cover for your car insurance to be valid for that driving purpose, regardless of whether you claim the mileage or not.