Car Insurance Based on Mileage

California is now allowing insurance companies to base their rates on your mileage

Ken Ryan puts 20,000 miles on his Ford Mustang every year. His wife is a teacher and only drives 1.5 miles to work each day, yet their car insurance isn't much different.

That is about to change.

The state of California is now allowing insurance companies to base their rates on how much you drive. 

State Farm is jumping on that and is introducing its "Drive Safe and Save" program.  The idea is to link car insurance rates directly to the mileage you drive.

"We ask the people what the actual mileage is on the car each renewal and then we're going to use that actual mileage to price the risks," said State Farm Insurance agent Walt Waggener. 

The insurance company can also keep track of your miles through the OnStar program where the mileage is sent by satellite directly to the insurance company.

Right now insurance rates do include estimated mileage but this is much more detailed. The Drive Safe program from State Farm starts with a basic mileage rate of 19,000 miles. The insurance company then offers discounts every 500 miles that it drops under that.

"So if you are driving fewer and fewer miles, which many people are today with this economy, this can really mean a big savings," said Waggener.

Ken Ryan hopes to see that discount coming from his wife's Chevy Suburban

"The first indications I got were that it was significant.  So I'm going to look forward to that, keep my fingers crossed and hopefully see some credit on my bill," said Ryan.

Other insurance companies are expected to start offering similar programs.

The program does not cover motorcycles or motor homes.


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