Should You Update Your Car’s Mileage With Your Auto Insurer?

Quick Answer

When a car insurance company has an accurate picture of how many miles you drive, it can set rates that more accurately reflect your driving behavior, which then might lead to lower premiums.

A hand hold the steering wheel of a car next to the car's dashboard.

How much you drive can be one of the most important factors in determining what you pay for auto insurance, so it's important that your insurer has accurate mileage for your vehicle. There are several ways your vehicle's mileage can be reported to your insurer, but they won't necessarily have the same result.

Here, we explain why your insurer needs up-to-date mileage for your vehicle and what issues can arise if your insurer doesn't have an accurate snapshot of the number of miles you put on your vehicle's odometer.

How Important Is Mileage in Calculating Your Insurance Premium?

Several factors go into how much you pay for car insurance. They include your age, your gender, your driving record, the car you drive, your level of coverage and how many miles you log every year.

Why does your car insurance company care about your annual mileage? If you drive, say, 12,000 miles a year, you typically stand a better chance of getting into a car accident than if you drive 4,000 miles a year. As of 2018, the Federal Highway Administration reported the average U.S. driver racked up 13,476 miles a year.

It's worth noting that not every auto insurer relies on your annual mileage to set your insurance rates. For instance, Farmers does not depend on a policyholder's annual mileage to establish rates (except in California). Rather, Farmers bases its rates on the number of miles logged by the average driver. Farmers, and other insurers that take a similar approach, consider where you drive more than how much you drive, as some places have higher accident rates than others. It notes that most accidents happen within 5 to 10 miles of a driver's home.

Why You Should Update Your Mileage

If your insurer asks for your mileage, it's important to keep it up to date. Why? Here are the four main reasons:

  1. It could save you money. If an insurer thinks you're driving more miles than you actually are, you might be missing out on lower rates. Some insurers offer a discount to drivers who log a lower-than-average number of miles per year. Keeping your mileage updated ensures you can still qualify for the discount.
  2. It could be considered fraud to report incorrect mileage. If you under-report your mileage, your insurance company might view that as a form of fraud. When you're putting in more miles behind the wheel than you're telling your company, you run a greater risk of getting into an accident. Under-reporting your mileage means an insurer lacks the proper data to set your rates; therefore, the insurer might be undercharging you.
  3. Frequent mileage updates are required with certain types of coverage. In some states, drivers can purchase pay-per-mile insurance. With this type of coverage, the cost of insurance varies from month to month based on how many miles you drive. Allstate, for instance, charges a per-mile rate combined with a flat daily rate. Pay-per-mile insurers normally capture your mileage by using in-car tracking devices.

How Do Auto Insurers Collect Your Mileage?

Auto insurers collect your mileage in several ways. These include:

  • Self-reporting: A driver may get a call from their insurer asking for a current odometer reading. The insurer may have no way to verify the accuracy of this self-reported data, however.
  • Technology: Some insurers have drivers put a tracking device in their car that automatically records mileage data and transmits it from the device to an insurance app installed on the driver's smartphone. In other cases, a device plugged into a port in your car (below the steering wheel, for example) automatically records data, including mileage, generated by your car.
  • Databases: Some insurers tap into state or national databases to confirm vehicle mileage. If the data comes from a third-party source, it might not accurately reflect your own mileage. For instance, a broad set of mileage data might be gathered around the country from state inspection providers, maintenance, repair shops and car dealers who might sloppily enter mileage information.

How Else Can You Save on Car Insurance?

Aside from making sure your insurance company has accurate data about your mileage, here are five other ways you can save money on car insurance:

  1. Raise your deductible. This can generate substantial savings.
  2. Bundle your auto insurance. Combining auto coverage with other policies, such as home insurance, could save you money. Many insurers offer discounts if you maintain at least two types of insurance with them.
  3. Ask about discounts. For example, drivers who've gone accident-free over a certain period of time may be eligible for a lower rate.
  4. Review your coverage. For instance, you may be able to drop comprehensive and collision coverage if your car is past a certain age.
  5. Shop around. The Insurance Information Institute recommends obtaining quotes from at least three insurers when you're looking for auto coverage. To make that task easier, check out Experian's auto insurance marketplace.

Another way to save on insurance is by improving your credit. In most states, auto insurers can use what's called a credit-based insurance score to help determine your rates. This score considers your history making your bill payments on time, although it differs from the credit score lenders use.

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