Car insurance is a necessary expense for drivers, but there are ways to reduce the cost. One strategy gaining popularity is usage-based car insurance, which allows drivers to pay for their coverage based on the number of miles they drive. By driving less, motorists can potentially save money on their car insurance premiums. In this article, we will explore how drivers can cut their car insurance bill by reducing their mileage. We will also discuss the benefits of usage-based car insurance and provide tips for finding the best insurance policy for your needs.

The Growing Popularity of Usage-Based Car Insurance

Usage-based car insurance policies are becoming increasingly popular as more drivers are driving fewer miles each year. According to research by Compare the Market, motorists who drive less than 4,000 miles a year could save up to £168 on their car insurance by switching to a pay-by-mile policy instead of an annual comprehensive policy ¹. These policies are designed to be a fairer option for low mileage drivers, as they are less likely to have accidents or make claims.

The data from Compare the Market reveals that 17% of drivers who make fewer journeys could save up to £168 on average by opting for a pay-by-mile policy. The average cost of a pay-by-mile policy is up to £477, compared to £585 for a comprehensive policy. For motorists who drive fewer than 4,000 miles per year, the mean price of pay-by-mile insurance falls to less than £414, compared to £582 for a comprehensive policy ¹.

Benefits of Usage-Based Car Insurance

Usage-based car insurance offers several advantages for drivers. Here are some key benefits:

1. Cost Savings

By paying for insurance based on the number of miles driven, motorists can potentially save a significant amount of money. If you don’t drive often or have a low annual mileage, switching to a pay-by-mile policy could result in substantial savings on your car insurance premiums.

2. Fair Pricing

Traditional car insurance policies often charge a flat rate, regardless of how much a driver actually uses their vehicle. This can be unfair for those who drive less frequently. Usage-based car insurance provides a fairer pricing structure, ensuring that drivers are only paying for the coverage they need.

3. Incentives for Safe Driving

Many usage-based car insurance policies offer rewards and incentives for safe driving. By monitoring driving behavior through telematics devices or smartphone apps, insurers can assess the risk profile of individual drivers. Those who demonstrate safe driving habits, such as avoiding sudden acceleration or hard braking, may be eligible for additional discounts or rewards.

4. Environmental Benefits

Driving less has a positive impact on the environment by reducing carbon emissions and congestion on the roads. By incentivizing drivers to reduce their mileage, usage-based car insurance policies contribute to a more sustainable transportation system.

The Rise of Pay-By-Mile Providers

With the increasing popularity of usage-based car insurance, pay-by-mile providers have seen significant growth in recent years. One such provider is By Miles, which has experienced a 125% increase in the proportion of drivers switching to their pay-by-mile policy since 2020 ¹. These policies are specifically tailored to low mileage drivers, offering a fair and cost-effective solution for those who don’t use their cars frequently.

By Miles analyzes the latest MOT data and found that the average annual mileage for UK drivers dropped by more than 1,000 miles to just 5,398 in 2021, representing a 24% decrease compared to pre-pandemic levels. Additionally, 74% of motorists now drive less than 7,000 miles per year ¹. These statistics highlight the changing driving habits of UK drivers and the potential savings that can be achieved through usage-based car insurance.

Tips for Finding the Best Usage-Based Car Insurance Policy

If you’re considering switching to a usage-based car insurance policy, here are some tips to help you find the best policy for your needs:

1. Compare Policies

As with any insurance policy, it’s essential to compare different providers and policies to ensure you’re getting the best deal. Look for reputable insurers that offer usage-based car insurance and compare their coverage options, pricing, and customer reviews.

2. Understand the Pricing Structure

Familiarize yourself with how the pricing works for the pay-by-mile policy you’re considering. Some insurers charge a base rate plus a per-mile fee, while others may have different pricing tiers based on mileage bands. Make sure you understand how your premiums will be calculated and how much you can expect to pay based on your estimated annual mileage.

3. Consider Telematics Devices or Smartphone Apps

Some usage-based car insurance policies require the installation of a telematics device in your vehicle to monitor your driving behavior. Others may use smartphone apps that utilize GPS and other sensors to track your mileage and driving habits. Consider whether you’re comfortable with the monitoring methods required by the insurer and choose a policy that aligns with your preferences.

4. Check for Additional Discounts and Rewards

In addition to mileage-based pricing, many usage-based car insurance policies offer additional discounts and rewards for safe driving. These may include lower premiums for avoiding accidents, maintaining safe speeds, and practicing good driving habits. Be sure to inquire about any potential discounts or rewards when comparing policies.

5. Evaluate Customer Service and Claims Process

While price and coverage are crucial factors when choosing an insurance policy, it’s also important to consider the insurer’s customer service and claims process. Look for insurers with positive customer reviews and efficient claims handling procedures to ensure a smooth experience in the event of an accident or claim.

Conclusion

Usage-based car insurance provides a compelling solution for drivers who don’t use their vehicles frequently. By switching to a pay-by-mile policy, motorists can potentially save money on their car insurance premiums while enjoying fairer pricing and incentives for safe driving. As driving habits evolve and more drivers opt for low mileage policies, usage-based car insurance is likely to become even more prevalent in the future. If you’re considering reducing your car insurance costs, it’s worth exploring the options offered by usage-based car insurance providers. Remember to compare policies, understand the pricing structure, and consider factors such as monitoring methods, additional discounts, and customer service when making your decision.