The important points
- Low-mileage insurance refers to programs that reward drivers who rarely use their cars with lower premiums. These include low-mileage discounts, usage-based insurance, and pay-per-mile insurance.
- How much you’ll save heavily depends on which provider and program you’re using.
- In Canada, low-mileage insurance programs are limited; Square One does not currently offer any low-mileage program.
How does car insurance work for low-mileage drivers?
How much you drive in a year affects your car insurance premiums. If you use your car every day, you’ll likely pay more than someone whose vehicle only leaves the garage once a month. Generally, infrequent drivers receive lower premiums than frequent drivers.
Infrequent drivers face lower insurance costs because insurers associate their driving frequency with a lower likelihood of making a claim.
If you’ve ever wondered why insurance providers ask for your estimated annual mileage, it’s all to do with your risk exposure. The lower your risk, the less you pay, and vice versa.
However, mileage-based savings don’t build up over time the way safe-driving credits do — say, the kind someone earns by maintaining a claims-free record over several years. Instead, they’re usually applied through one of the following programs, depending on what the insurer offers:
Square One doesn’t currently offer any of these programs.
It’s also worth noting that these generally only apply to long-term insurable vehicles. They won’t apply to collector vehicles, for example, as these aren’t usually driven year-round.
What is the best car insurance option for low-mileage drivers?
There’s no single best insurance option for every low-mileage driver; it depends on your driving habits and what’s available where you live. It’s worth comparing a few quotes from different providers, as not every insurer will offer the same savings opportunities.
Low-mileage discounts
Low-mileage (or mileage-based) discounts are savings based on how much someone drives their insured vehicle. They’re commonly called out like any traditional discount, but not with all providers. For example, with Square One, your estimated mileage is baked into our rating model.
To qualify for such a discount, the insurer sets a distance you must stay under during their assessment period — typically one year. They’ll usually also specify to which coverages it applies.
For example, ICBC offers two mileage-based discounts. Customers who drive less than 15,000 kilometres in a year may qualify for a 10–15% discount, which applies to the optional coverages. On top of that, there’s a 10% discount for policyholders driving less than 5,000 annual kilometres, which applies to their basic coverage.1
Not all insurers offer mileage-based discounts. But if one is available and you qualify, you’ll need to demonstrate to your insurer the mileage you’ve put in over the term — they won’t just take your word for it.
Normally, a clear picture of the vehicle’s odometer will do the trick. Take photos of the mileage reading at the start and end of the policy term. Service records may also work in some cases. If you transfer the policy to another vehicle mid-term, you’ll likely need to provide readings for both vehicles.
As for how much you can save, it depends on the insurer and program. Generally, most low-mileage discounts will fall somewhere between 10% and 40%. The maximum mileage limits can also vary, but they’ll typically fall in the 5,000 to 15,000 kilometres-per-year range.
Ask your insurer about their specific offerings. You may discover other car insurance discounts, too.
Usage-based insurance
UBI relies on various tracking technologies (often a telematics device or smartphone app) to monitor a person’s driving habits. Using this data, the insurer will adjust the driver’s premiums.
Telematics may track a wide range of driving behaviours including speed, acceleration patterns, braking, trip duration, distance driven (or mileage), and more.2 Some devices can also recognize when you’re distracted driving.
Driving behaviours that the insurer deems unsafe will result in premium increases. But if you’re a careful, smooth driver, you’ll usually get rewarded with lower premiums. Driving less poses less risk to the insurer, too. So, theoretically, being a low-mileage driver can also bring your costs down.
However, if you’re a reckless driver, you may find those same savings harder to come by even if you rarely drive your car.
Assuming you aren’t reckless, though, you’d probably be better off with UBI than with one-size-fits-all insurance. Plus, you’ll see those savings without necessarily having to reduce your coverage limits or raise your deductibles.
UBI isn’t a standardized product, so you’ll want to compare what different providers have to offer. For example, some UBI providers offer a one-time sign-up discount. Some will adjust your premium at renewal time, whereas others recalculate it several times throughout the year.
Note: Square One doesn’t offer UBI.
Pay-per-mile (or pay-per-kilometre) insurance
Pay-per-mile insurance and UBI are very much related concepts. In fact, both programs rely on telematics for pricing purposes, but they still differ in some respects.
As previously mentioned, telematics programs consider many usage-based rating factors — speed, braking, mileage, and so on. Pay-per-mile programs may collect some of that driving-behaviour data too, but they’re still mainly distance-focused. Your driving style matters less or not at all, depending on the program and insurer.
To avoid confusion, think about it this way: all pay-per-mile insurance is usage-based, but not all usage-based insurance is pay-per-mile.
Pricing-wise, you typically pay a base rate plus a small charge for each kilometre you drive. That means the cost is split into two parts:
- Base premium. This is a flat fee based on the foundational risk factors, like your age, coverage selections, driving history, vehicle model, and so on.
- Variable premium. This is a per-kilometre (or per-mile) fee that accumulates during the assessment term, and is added to the base premium. It’s often just a few cents per kilometre.
Compare that to a traditional policy, where you’d normally pay a fixed monthly or annual premium. With pay-per-mile, your premium constantly adjusts to the amount you drive, which means you won’t have the same premium each month.
Like UBI, one benefit of this program is greater control over your driving habits. Stick to steady habits and routines, and savings will (usually) follow. Of course, if you notice your premium creeping up, you can always dial back your driving or find other ways to reduce your usage — for example, carpool, take transit, or combine errands into fewer trips.
Still, telematics-based programs aren’t for everyone. For instance, if you’re a high-mileage driver, the per-kilometre charges can add up quickly. Similarly, if you aren’t comfortable with your insurer collecting your data continuously, a traditional policy may be more suitable.
Pay-per-mile programs are very common in the US, but they aren’t yet widely available in Canada. Check with your provider to find out what usage-related factors they use to calculate your rates.
Note: Square One doesn’t sell pay-per-mile insurance.
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