Can you save money on car insurance by driving less? 

Driving fewer kilometres can do more than save fuel, it can also cut your insurance costs.

Last updated: 17 Mar 2026

While driving less is a fairly obvious way to save money on fuel, did you know that reducing the number of kilometres you drive each year can also lower what you pay for car insurance? If you drive fewer kilometres than the average person over the course of the year, you could be eligible for a discounted premium.

It’s common sense that driving less should mean that you’re at a lower risk of having an accident, so it follows that you should have a lower premium.

If you drive fewer kilometres than the average person over the course of the year, you could be eligible for a discounted premium

This has always been a factor that insurers take into account when determining your premiums, but some insurers are now also offering separate policies designed specifically for people who drive less. These give the same comprehensive cover as regular policies, but for lower premiums. 

We look into these low-kilometer policies, and help you decide if you need one to save money on your car insurance. 

Does driving fewer kilometers actually lower your premium? 

In short, yes. It’s clear that the less you drive, the lower your insurance cost can be. The CHOICE insurance experts crunched the numbers in their database of over 200,000 comprehensive car insurance quotes from January 2026 to see how much your mileage influences your premium.

How can I get these savings?

While insurers generally charge lower premiums for customers who estimate they will drive fewer kilometres than average, some insurers also have a separate policy for short-distance drivers. For example, Budget Direct offers customers its Gold Low Kilometres Comprehensive policy and CommBank has a policy called Comprehensive Saver.

Many others refer to it as a Pay-as-you-Drive (PAYD) option. A number of brands underwritten by Hollard – AHM, Bupa, Huddle and  Real Insurance – offer PAYD options.

These policies require you to advise the insurer of your odometer reading at the beginning of the policy, and how many kms you expect to drive that year, in return for a lower premium. If you’ve gone over that estimate when you make a claim, you have to pay an additional excess. This was an extra $1000 in all the policies we looked into.

These policies require you to advise the insurer of your odometer reading at the beginning of the policy, and how many kms you expect to drive that year

These options are available to those who drive less than 10,000km per year (Budget Direct), or 15,000km (CommBank and most PAYD options). Given that Australians are estimated to drive an average of just 12,000–15,000km per year, these options could be feasible for most consumers. 

Even insurers who don’t offer these low-kilometre policies do offer reduced premiums for customers who drive less. But the amount by which your premium is reduced is unclear, and depends on the insurer’s algorithm. A number of insurers, like AAMI, Apia, Coles, Everyday, GIO and Suncorp, may specify that lower kilometres mean a lower premium, however, it generally does reduce your premium with other insurers too.

How much can I actually save?

We took a quick look at online quotes and found you could save roughly 30% buying a low-kilometer policy from Budget Direct capped at 5000km, compared with a regular policy estimating a mileage of 30,000km, with all other options remaining the same. Driving less (5000km) with a PAYD policy from Real Insurance could save you even more – around 50%. 

Even without taking out a special low-kilometre policy, estimates for AAMI’s regular comprehensive policy were nearly 30% cheaper when we said we expected to drive 5000km as opposed to 30,000kms.

By contrast, when we entered the same details for a QBE quote, we only found a saving of 4% for driving less. So, as always with insurance, it pays to shop around. 

Driving less with a PAYD policy from Real Insurance could save you around 50%

One important difference between simply entering a low kilometre estimate when applying for insurance versus actually taking out a dedicated low-kilometre policy is what happens if you underestimate your kilometres. With a dedicated low-km policy, you’ll have to pay an extra $1000 excess if you’ve underestimated.

With a regular policy it’s not so clear. Since they ask about “average annual kilometres” during the quoting process, rather than determining a specific target or requesting your odometer reading, there’s obviously a bit of leeway in the estimate. It is important to try to be accurate however, so that the insurer can’t use an incorrect estimate as grounds to reduce or deny your claim.

How we compared prices

To explore whether you can save more with low-kilometer policies compared to regular policies, we tested two scenarios driving either 5000km or 30,000km per year, with 4 different insurers. We looked at: 

• Scenario 1: A 2022 Rav4, based in Sydney’s inner west with a 40-year-old female driver  
• Scenario 2: A 2016 Mazda2, based in South Adelaide with a 65-year-old male driver 

And compared quotes from:

• AAMI
• Budget Direct (low-km policy)
• Real Insurance (PAYD)
• QBE

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