Low mileage car insurance

If you don't clock up many miles each year, read our guide to find out how you could pay less for your 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.

Teacher driving 4,000 miles per year

  • Cheapest price comparison site quote: £375.40
  • Pay-per-mile quote: £381.30

      Teacher driving 10,000 miles per year

      • Cheapest price comparison site quote: £509.60
      • Pay-per-mile quote: £639.30

      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.

      What happens if I provide incorrect information about my annual mileage?

      Danny Butler

      Finder insurance expert Danny Butler answers

      Standard car insurance providers will ask you to provide an estimate of your annual mileage when you take out your policy. It’s important to try to be as accurate as you can with your estimate. Insurers know it’s almost impossible to get your mileage estimate bang on, and generally allow drivers to go a bit over it – but exactly how much tolerance there is will depend on the insurer.

      Don’t be tempted to significantly underestimate your mileage. It may invalidate your insurance if your actual mileage is massively different from your estimate.

      If you realise part-way through your policy term that you’ve miscalculated your mileage, let your insurer know. If it’s more than you estimated, your premium may rise, and you may incur an admin fee. But it’s better than risking your insurance being invalid if you need to make a claim.

      And don’t assume that overestimating your mileage is the best solution. While inadvertently estimating a higher mileage than you clock up in practice is unlikely to invalidate your policy, it could result in premiums that are higher than they need to be. If you’re driving less than you expect and tell your insurer, if you’re lucky you could even get an insurance rebate.

      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

      Pros

      • If you don’t drive many miles each year, low mileage car insurance could save you money.
      • It could work out to be cheaper than standard car insurance if you’re a younger driver looking to keep costs down.

      Cons

      • If your annual mileage is high, you could end up paying more for a low mileage policy than standard car insurance.
      • There may be a cap on the number of miles or hours you can drive.
      • You may need to have a black box tracker fitted in your car to monitor your mileage.

      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.

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