How Do Car Insurance Companies Know Your Odometer Reading?

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Car insurance companies use the total annual mileage driven to calculate insurance premiums. Some insurance companies offer an odometer device to calculate car insurance mileage. 

But should you choose to get it? And do you have to use an odometer device? We’re here to answer these questions for you! Keep reading to understand how car insurance companies can view your odometer reading and how far you drive. 

How do auto insurance companies obtain your auto odometer reading?

Car insurance companies get your odometer readings in a variety of ways. They might ask you directly, obtain it via a tracking device, or ask for your odometer reading from third-party companies, like mechanics or repair shops. Insurance tracking devices come as dongles that you can plug into your car or an app for your smartphone. 

What is an insurance tracker?

With an insurance tracker, you will plug it into your car. Insurance tracking devices are called telematic devices, and they track more than just total mileage driven. 

A typical telematic device connects to the vehicle’s computer and then sends data to the insurance company. Data collected includes speed, mileage, location, braking habits, phone use, nighttime driving, taking corners too fast, and traffic patterns. 

This information is analyzed by the insurance company to determine if you are considered a safe driver with low risk for an accident. 

How does it actually work?

The most common odometer tracker is a dongle that plugs into your OBD-II port, usually beneath the steering wheel. The purpose of the dongle is to collect data. Like speed, braking, mileage, and phone use. 

The phone app works in a similar way but accesses your phone’s GPS. While the app doesn’t have direct access to the vehicle’s data, it can sense speed, acceleration, speed limits, total mileage, and sudden braking. 

In both cases, the data is sent wirelessly to your insurance company. This data can affect insurance premiums for better or for worse, depending on how the data collected matches with your previous insurance record.

What is a vehicle odometer reading?

A vehicle odometer reading is a physical reading or photo taken of your vehicle’s odometer. With an annual or bi-annual odometer reading, car insurance companies will have an accurate picture of your annual mileage. 

What data is tracked?

The precise data that is tracked can vary by the insurance company. When in doubt, check with your car insurance company. In general, an insurance company will track mileage driven, average speed, traffic conditions, sudden braking, phone use while driving, night driving, and accidents. 

These factors contribute to your policy premium in some cases. In fact, they can even cause your premium to increase or decrease, depending on your situation. 

Insurance companies’ use of modern technology

Insurance companies have used modern technology to reward safe drivers and further refine their models. Insurance is based on projections and probability, like your age, your gender, the model of your car, your past driving history, and previous insurance records. These are all factors considered by insurance companies. 

Now, instead of only using probabilities, they can collect real-time data from customers for more sophisticated data analysis and accident probability analysis. Even if it seems invasive, if you drive safely it can mean lower premiums and long-term savings.

How insurers calculate mileage

If insurers don’t use a mileage tracking device, they can collect mileage through your personal reporting, databases, or third parties such as your mechanic. Generally speaking, insurers will ask you for an estimate of your total mileage, but they might also take an annual odometer reading for verification purposes as well. 

If they choose to use databases or repair shops’ information, they could have an accurate odometer reading at any point in time. It is important to report mileage as accurately as possible to insurance companies for fair premiums and to avoid insurance fraud. 

Is it legal for auto insurance companies to track your miles?

By agreeing to use car insurance, you agree to provide accurate information regarding your mileage. Insurance companies need accurate mileage information to calculate insurance premiums. The more you drive, the greater the chance of an accident over time.

However, you will have to agree specifically to install a tracking device or dongle. Some insurance companies don’t require them, while others offer them as an optional feature. If you agree to install the device and allow the insurance company to use that information, it can lead to lower rates if you’re a good driver.

Better driving equals lower premiums

How do car insurance companies know how far you drive? With an odometer device, or through self-reporting or third-party reports to determine car insurance mileage. If you are worried about a car tracker for privacy reasons, you can choose an insurance company that relies on self-reporting, databases, or third-party records. 

However, keep in mind that evidence of low annual mileage and safe driving will benefit your insurance record and may lead to lower insurance premiums. Whether you choose a smartphone app, car attachment, or self-reporting, it’s a good idea to be prepared for unexpected vehicle expenses, maintenance, and repairs. 

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