Insurance based on mileage to be offered by state farm

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26It is an obvious fact that if you drive less in your car, the chances of meeting with an accident are less too. This is also the perception of the insurance companies who are planning to use it to attract new policy holders. Discounts are being offered to policy holders by correlating the risk they hold and the insurance rates they receive. State Farm is taking this initiative to offer rebates to its customers in California by using their odometer readings.

State Farm, the insurance giant has create a voluntary program called Drive Safe & Save, wherein policy holders in California will see an adjustment in their policy rates in the future, for the amount of driving they have done over the previous six months. Earlier the insurance company used to consider policy holders either a low mileage driver or a high mileage driver, with the cut-off mark being 7500 miles per year. This is quite a tough mark, because most drivers in California drive an average of more than 12,000 miles.

The new program will begin at the end of February, wherein drivers will fall into either of 39 segments of mileage. The discounts start at 19,000 miles. From there on, drivers would see 1% or 2% rebates for a reduction of 500 miles. The biggest discount of about 45% will be offered to ultra-low mileage drivers who drive around 2000 miles annually. This would be most useful for retirees who can save on policies on their second and third vehicles.

The cost on an average of an insurance policy in California is around 750 dollars. According to estimations from State Farm, the average policy holder can save up to 6% on their insurance premiums. To add to that State Farm is also providing an added incentive of 5% discount for those who enrol for their programs. There are two outcomes of this change in policy. If you drive a lot in the first 6 months, your insurance rate will go up. But on the brighter side, since the insurance rates are adjusted every 6 months, there is every opportunity for you to bring that insurance rate down too after 6 months.

This voluntary program is very similar to the “pay as you go” program. Similar discounts are offered in collaboration with car manufacturers like GM too as an incentive to customers especially California.