Some auto insurance companies offer a low annual mileage auto insurance discount, if you do not put a lot of miles on your car. What happens if you put more mileage on my car than you reported to your auto insurance company? Can they charge you more money for not driving low miles you reported, or not pay a claim? Here is what you need to know about the low annual mileage discount, how to get it, and the consequences of misreporting annual mileage.

I worked for an insurance company giving you a lower rate if you put less than 8,000 miles per year on your car. Other insurance companies gave lower rates for less than 7,500 miles per year.

In the old days, insurance companies took your word on your annual mileage. As long as there was not contradictory information, like you say you put 7,000 miles a year on your car, but you drive 5 days a week to your job which is 20 miles away (Over 10,000 miles a year commuting back and forth to work alone), you received the discount.

Most people put 12-15,000 miles a year on their cars. When the insurance company I was working for noticed half of their customers were getting the low mileage discount, the insurance company knew many people were not accurately reporting their mileage. My insurance company stopped offering the discount, but no customers had to pay higher rates retroactively because they did not report accurate annual mileage to the insurance company. Insurance companies cannot decline a claim because of inaccurate annual mileage reported to the insurance company.

Many people under-estimate the number of miles they actually drive. They consider how far they drive back and forth to work, and think that makes up the majority of their car’s annual mileage. Statistically for most people, 75% of their car’s annual miles come from recreational use.

Some sales-hungry agents, trying to close more sales with lower rates, compound the problem of inaccurate reporting of low annual mileage, by assuming low annual mileage, without asking the customer. This is bad for the customer, when their auto insurance policy renews six months later and their rates go up, because low annual mileage the customer never said they drove, was not verified, and the low annual mileage discount is removed. Always review the application your insurance agent submits to the company for accuracy, and ask questions about anything of which you are unsure, to avoid this problem.

Other insurance companies had the same problem with too many customers getting the low mileage discount when they probably should not get it, but continued to offer the annual mileage discount. However, the insurance company would determine the annual mileage, by occasionally asking the customer to report odometer readings on their cars, to verify the actual annual mileage.

If your insurance company has your annual mileage at 7,000, qualifying you for a low mileage discount, they will send you a letter 60 – 90 days before your renewal, asking for an odometer reading and date of the reading. Sometimes the insurance company will want proof, like oil change paperwork, to prove the odometer reading. The insurance company compares the new odometer reading and date with the previous odometer reading and date, and verifies your annual mileage. If you are still putting 7,000 miles a year on your car or less, you keep the discount for your next policy period. If not, the discount is removed at your next renewal date. But the insurance company will not say you owe them more money for putting more mileage on your car than they expected over the previous year.

So, how do you make the most of the low mileage discount with companies offering it? Know your odometer reading, and keep track of your annual mileage for each car you own.

With some insurance companies, or because of state law, the less mileage you put on your car, the lower your rate. So, for example, you may get an even lower rate for 5,000 miles a year, than 7,000 miles a year.

Don’t guesstimate your odometer reading, because if you are off on the date or a few thousand miles, you may not get the low mileage discount you should qualify for the next time the insurance company asks for the odometer reading.

If the distance you drive to work becomes shorter, or you have a lifestyle change (telecommuting, public transit, carpooling, moving closer to work, etc.) reducing your annual miles, document your mileage over the next 2 months and report it to your insurance company.

Even if a couple months ago you were driving more, and set to put 15,000 miles a year on your car, you won’t be driving as much in the future, so if you can prove now you will be putting fewer miles with 2 odometer dates at least 30 days apart, you can get the low mileage discount.

Now that you are putting less miles on your car, it is a good time to shop for better rates with insurance companies that have the best rates for low mileage drivers — particularly if your current insurance company does no offer a low mileage discount. As always, you can read my auto & home insurance company reviews, to find all the major companies available to you.

The annual mileage you put on your car will become easier for insurance companies to determine, if you participate in usage-based auto insurance programs, like Progressive’s Snapshot program, where insurance companies use technology (called telematics) to monitor you driving habits. Programs like these, even though you give up some privacy, should help low mileage drivers save even more in the future, and avoid customers not deserving the discount from getting it. Low annual mileage auto insurance discounts based on the word of customers, and verified through periodic odometer checks, may disappear in the future.

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