Practically any application for auto insurance will ask prospective policyholders how many miles a year they drive, but what consumers may not know is that the annual mileage is likely playing into how much it will cost them to secure coverage.
The vast majority of drivers use mileage as a rating factor when setting rates. In some states, like California, insurers who do not take mileage into account when setting premium rates are actually in violation of state law. And state regulators even announced recently that prices for
car insurance in MI can actually be based completely on miles driven, with no other factors necessarily being taken into account.
As the writers at OnlineAutoInsurance.com explain in a new FAQ, this is because annual miles driven can tell an insurer a lot about the amount of risk that a driver poses. A Brookings Institution study presented 2005 claims data from a major insurer showing that 5,000-mile-a-year drivers had claims rates that were half that of 25,000-mile-a-year drivers for certain coverage types.
But low-mileage consumers have been saving even more in recent years with the spread of pay-as-you-drive (PAYD) insurance programs that actually monitor the miles driven and provide more specific tiers for rating purposes.
PAYD programs have been touted as a way to actually provide incentives for drivers to spend less time on the road. The Massachusetts Office of Energy and Environmental Affairs included PAYD in its long-term energy and environment plans. By instituting statewide PAYD programs, the office wrote in a report, traffic congestion could be significantly lowered while providing savings of between $60 and $290 per person in the state.
To learn more about this and other insurance issues, readers can go to
http://www.onlineautoinsurance.com/michigan/ where visitors will find informative resource pages and a quote-comparison generator that can help consumers in any state find the best rates for a policy.
To access the full FAQ, readers should follow the “Questions” link located at the top of any page on the site.
