How Do Car Insurance Companies Know Your Odometer Reading?

Car insurance companies track your odometer reading in a few main ways. They may:

• Ask you to self-report your mileage when you apply or renew

• Install a small telematics device that plugs into your car's OBD-II port,

• Collect data through a mobile app on your phone

• Pull records from third-party sources like your state Department of Motor Vehicles (DMV), repair shops, smog checks and motor vehicle reports.

Most insurers use a mix of these methods to confirm the number is accurate.

Key Takeaways

• Self-reporting and mileage tracking: Insurers confirm your mileage through driver-reported numbers, plug-in devices and mobile apps.

• Third-party records: DMV files, repair shop invoices, smog checks and CARFAX-style reports give insurers a backup source.

• It's legal: Using apps or devices for mileage tracking is legal in all 50 states when you opt in, according to the National Association of Insurance Commissioners (NAIC).

• Low-mileage threshold: Driving under 7,500 miles per year often qualifies you for a low-mileage discount.

• Premium impact: Drivers in usage-based programs can save up to 30% based on safe driving and low mileage, according to the Insurance Information Institute (2024).

• Underreporting risk: Lying about mileage can lead to higher rates, denied claims or a canceled policy.

How Do Car Insurance Companies Verify Your Mileage?

Insurers verify your mileage by combining what you report with data pulled from telematics devices, mobile apps, repair shops and DMV records.

Car insurance companies get your odometer readings in a variety of ways. They might ask you directly or obtain it via a tracking device you’ve consented to install. Insurance tracking devices come as dongles that you can plug into your car or an app for your smartphone. 

What Is a Telematics Device and How Does It Track Your Car?

A telematics device is a small tool that plugs into your car's OBD-II port or runs through a mobile app, recording mileage and driving behavior in real time.

In the case of auto odometer readings, they track the total mileage driven and a host of other data. 

The device connects to the vehicle's computer and then sends data to the insurance company. Data collected includes things like driving behavior, mileage and even parking habits.

Telematics programs collect a specific set of driving data points that insurers use to price your policy. Here's what most programs track:

• Total mileage: The number of miles you drive each day, week and year.

• Average speed: How fast you usually go and how often you speed.

• Hard braking: Sudden stops that suggest tailgating or distracted driving.

• Rapid acceleration: Quick starts that signal aggressive driving.

• Cornering: Sharp turns taken at high speed.

• Phone use while driving: Texting, scrolling or handling your phone behind the wheel.

• Time-of-day driving: Late-night trips, which carry a higher crash risk.

• Location data: General routes and areas you drive in.

• Accident events: Sudden impacts the device flags as a possible crash.

What Is Usage-Based Insurance?

Usage-based insurance (UBI) is a type of car insurance that sets your rate based on how much and how safely you drive. Instead of relying only on broad factors like your age or ZIP code, UBI programs use telematics data to price your policy around your real driving habits.

The NAIC reports that every major U.S. auto insurer now offers some form of UBI, and the Insurance Information Institute notes that adoption has grown sharply since 2020 as more drivers look for ways to lower their premiums.

Major Insurer Telematics Programs

Here's how the largest telematics programs compare on mileage and driving behavior tracking:

How Does an Insurance Tracker Work?

Data collected from the tracker 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 your previous insurance record.

What Is a Car 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 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. 

How Car Insurance Companies Use 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 Car Insurers Calculate Vehicle Mileage

If insurers don’t use a mileage-tracking device, they can collect mileage through your personal reporting and databases. 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. Some carriers also verify vehicle mileage using motor vehicle records (MVRs). It is important to report mileage as accurately as possible to insurance companies for fair premiums and to avoid insurance fraud, according to a 2022 article from Experian.

Is It Legal for Insurers to Track Your Odometer?

Yes — it's legal for insurers to track your odometer and driving data in all 50 states as long as you agree to the program when you sign up, per the NAIC.

Insurance companies need accurate mileage information to calculate car insurance premiums. The likelihood that you will be in an accident increases the more time you spend on the road. As a result, car insurance companies will charge you more because they view you as a higher risk.

To put it simply, insurance companies give discounts to drivers with low mileage because they reward those who pose a lower risk.

Although they have a right to know your mileage, you will have to agree 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.

How Does Your Mileage Affect Your Car Insurance Premium?

Lower annual mileage typically lowers your premium, while high mileage or risky driving habits can raise it.

Keep in mind that evidence of low annual mileage and safe driving could 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. 

Frequently Asked Questions

Do insurers check mileage?

Yes. Typically, insurance companies check mileage to determine how much you drive. They can use this information to calculate your premiums.

Can you get in trouble for lying to a car insurance company?

It's never a good idea to lie to your insurance company. If you feel like you could get a better rate, do your research and check multiple insurance companies. 

What is considered low mileage for car insurance?

Most car insurance companies define low mileage as traveling less than 7,500 miles annually or less than 10 miles per day.

Can insurers check your odometer without your permission?

Insurers can't physically inspect your car without your consent, but they can pull mileage records from third-party sources like the DMV, repair shops and motor vehicle history reports. By signing your policy, you typically agree to let your insurer verify mileage through these channels.

How often do insurers verify your mileage?

Most insurers check mileage once a year at renewal, though telematics users have their mileage tracked continuously. Some companies also spot-check during claims or when you add a new vehicle to your policy.

What happens if you underreport your mileage?

If you report fewer miles than you actually drive, your insurer can adjust your premium upward, deny a claim or cancel your policy. State insurance departments treat material misstatements as a form of insurance fraud, so it's smart to give an honest estimate.

Which insurers use telematics?

Major insurers with telematics programs include Progressive, Allstate, State Farm, Geico, Nationwide, Liberty Mutual, Travelers and Root. According to the NAIC (2024), every top 10 U.S. auto insurer now offers a telematics or usage-based option.

What is considered low mileage for car insurance?

Most insurers define low mileage as driving under 7,500 miles per year, though some set the cutoff at 5,000 or 10,000 miles. Drivers who hit the low-mileage threshold often qualify for discounts of 5% to 15%.

Key Terms

• Telematics: Technology that tracks your driving data, like mileage, braking, speed and time of day, through a plug-in device, mobile app or built-in vehicle system.

• Usage-based insurance (UBI): Car insurance that uses your actual driving habits, including mileage and behavior, to help set your premium instead of relying only on traditional risk factors.

• Odometer reading: The number of miles a vehicle has traveled, shown on the dashboard and used by insurers to estimate annual driving and verify reported mileage.

• Motor vehicle record (MVR): A state-issued record that can include vehicle or driver information insurers may use to help verify mileage, ownership, registration or driving history.

• Insurance fraud: A dishonest act meant to gain money or benefits from an insurer, such as knowingly underreporting mileage to try to lower your premium.

Sources:

• National Association of Insurance Commissioners (NAIC): Telematics

• National Association of Insurance Commissioners (NAIC): Understanding Usage-Based Insurance

• Merriam-Webster: Odometer

• Office of the Law Revision Counsel: 18 U.S. Code § 2725 - Definitions

• National Association of Insurance Commissioners (NAIC): Insurance Fraud

Summary generated by AI, verified by MoneyLion editors