Motorists looking to reduce their expenses may find an unexpected source of savings: driving fewer kilometres each year. Industry data suggests that lower annual mileage can significantly reduce car insurance premiums, with some drivers potentially cutting costs by as much as 50%.
The logic is straightforward. Drivers who spend less time on the road are statistically less likely to be involved in accidents, making them a lower risk for insurers. As a result, many insurance providers factor annual mileage into their pricing models, rewarding those who drive less with reduced premiums.
Recent analysis by CHOICE, based on more than 200,000 comprehensive car insurance quotes collected in January 2026, confirms that mileage plays a meaningful role in determining premiums. The findings show a clear trend: the fewer kilometres driven, the lower the insurance cost.
In response to this trend, some insurers have introduced specialized low-kilometre policies designed for motorists who drive below average distances. These policies offer the same level of comprehensive coverage as standard plans but at a reduced price. Options include Budget Direct’s Gold Low Kilometres Comprehensive policy and CommBank’s Comprehensive Saver, as well as Pay-as-you-Drive (PAYD) plans offered by brands such as AHM, Bupa, Huddle, and Real Insurance.
Typically, these policies require drivers to provide an odometer reading at the start of the policy period and estimate their annual mileage. In exchange, they receive a discounted premium. However, if a driver exceeds their declared mileage and later files a claim, they may face an additional excess fee—often around $1,000.
Eligibility for low-kilometre policies generally applies to drivers covering less than 10,000 to 15,000 kilometres annually. Given that the average driver travels between 12,000 and 15,000 kilometres per year, such policies could be suitable for a large portion of motorists.
Even insurers that do not offer dedicated low-mileage plans often provide lower premiums for drivers who report reduced annual usage. However, the exact discount varies widely depending on each insurer’s pricing algorithm, and the savings are not always transparent.
A comparison of online quotes highlights the potential benefits. A driver estimating 5,000 kilometres per year could save around 30% with Budget Direct compared to a standard policy based on 30,000 kilometres. PAYD options from Real Insurance showed even greater savings, with reductions of up to 50%. Meanwhile, a standard comprehensive policy from AAMI was nearly 30% cheaper when lower mileage was declared.
However, not all insurers offer the same level of savings. Quotes from QBE, for example, showed only a modest 4% reduction for lower mileage, underscoring the importance of comparing providers before choosing a policy.
Drivers should also be cautious when estimating their annual mileage. While dedicated low-kilometre policies impose clear penalties for exceeding limits, standard policies rely on estimated averages. Providing inaccurate information could potentially affect claims, making it important to give realistic estimates.
The analysis was based on two driver scenarios—a 40-year-old female driving a 2022 Toyota RAV4 in Sydney and a 65-year-old male driving a 2016 Mazda2 in South Australia—across multiple insurers including AAMI, Budget Direct, Real Insurance, and QBE.
For consumers, the takeaway is clear: reducing time on the road not only lowers fuel costs but can also deliver substantial savings on car insurance, particularly when paired with the right policy.
