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Deal of the Day by Kelli B. Grant (Author Archive)
Auto Insurers Offer Discounts to Those Who Drive Less
Updated on January 27, 2009.
LEAVING THE CAR in the driveway more often could do more than reduce what you pay at the pump — it can also cut your auto insurance premiums.
A growing number of auto insurers, including such big names as State Farm, Progressive (PGR) and GMAC, are offering discounts on premiums of up to 60% to drivers who take to the road less often. They can do so because, thanks to high gas prices, drivers across the country are driving less — Americans drove 112 billion fewer miles between November 2007 and November 2008 than during the previous year, according to the Federal Highway Administration.
"Any change in your driving habits can have a direct impact on your rates," points out Sam Belden, director of consumer experience at Insurance.com. "[Insurers see it as] less time on the road means less chance of an accident."
Miles driven is one of the many risk factors that determine a policy holder's rate. A driver who reduces the amount of time they spend behind the wheel could prompt an insurer to switch them to a less risky — and cheaper — classification. Taking the bus part of the way instead of driving to work, for example, might prompt a switch from "long commute" to "short commute." Of course, available discounts will vary by state and a driver's other risk factors (such as age, vehicle type and accident record).
The only way to find out if you qualify, though, is to call your insurer. To give you an idea of what you can save, here's what some of the major auto insurers are currently offering:
Drive-Less Discounts | ||
Insurer | Discount* | Proof Required |
American Family | Drive fewer than 7,500 miles annually, and save 5% to 12%. | Talk to your agent about your current driving behaviors and mileage. |
GMAC | Reduce mileage to between 12,501 and 15,000 miles a year to save 13%; 10,001 to 12,500 miles to save 18%; 7,501 to 10,000 miles to save 26%; 5,001 to 7,500 miles to save 34%; 2,501 to 5,000 miles to save 39% and 2,500 miles or fewer to save 54%. | Policy holders must enroll in OnStar Vehicle Diagnostics ($199 annually), which tracks mileage and other driving statistics. |
Farmers | Someone who switches from the "business" (primarily someone who drives for work purposes) to the "commute" (a person who racks up most of their miles driving to and from work) driving category could save 15% to 25% on their premiums. Someone who switches from "commute" to "pleasure" (a person who drives for primarily personal/recreational use) could save 5% to 10%. (Agents determine the category and discount based on a series of questions about your driving habits, and the distance between home and work.) | Talk to an agent about your current driving behaviors and mileage. |
Liberty Mutual | Drive fewer than 7,500 miles annually, and save 10% to 15%. If your one-way daily commute is fewer than 10 miles, you can save another 5%. | Talk to an agent about your current driving behaviors and mileage. |
Progressive | New and existing policy holders who sign up for the voluntary My Rate program save 10% on their first six-month term. Based on the policy holder's driving habits and mileage during that time, drivers can save up to 30% more (New Jersey policy holders, up to 50%) on a renewal policy for the next six months, for a total possible discount of 40% (60% in N.J.). As long as the driver continues to renew their program membership, they can keep saving. The catch? Drive recklessly or dramatically increase mileage, and the rate could revert to the premiums paid before joining My Rate. (In N.J., drivers might even pay 9% more.) | Members plug a wireless device ($5 a month, free in N.J.) into their car's onboard diagnostic port to track mileage, speed, etc. Consumers can view their account online to see daily updates on how behaviors affect their discount at the time they renew their policy. |
State Farm | Drive fewer than 7,500 miles annually, and earn a discount of 12% to 18%. Drive more than 7,500 miles, and a driver may still qualify for a discount based on reducing commute mileage. Someone with a "long commute" (more than 100 miles weekly) who cuts it to a "short commute" (30 to 100 miles weekly) could save 5%. Cut a "short commute" to "pleasure use" (less than 30 miles weekly) and save another 7%. | Consumers fill out a form annually to document odometer readings. "We're counting on their honesty," says spokesman Dick Luedke. |
Save More on Insurance | ||
"If a good driver is driving less, they're less likely to be in an accident," says Loretta Worters, a vice president with the Insurance Information Institute, an industry group. Insurers see you as a safer bet to be accident-free (hence the discounted rates). If you agree, consider raising your deductible — what you'd pay upfront before the insurance kicks in. Increasing a $250 deductible to $500 could save 15%, she says, while raising it to $1,000 could knock off 40% or more. | ||
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