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Telematics insurance: How much to add extra miles onto policy?

I took out a telematics policy with Markerstudy in September 2020 through a broker called Sterling Insurance.

I agreed to 8,000 miles at a cost of £1,200 which, although pricey, I am 18 and it was one of the better offers.

Last month, the mileage limit was getting low so I contacted the broker to ask how much it would be to increase my miles.

They came back with two quotes, one for 2,000 extra miles which would be £688 and one for 5,000 miles which would be £996.

Telematics policies help keep premiums down for younger drivers but rules must be followed

I cannot afford this and told them so. Markerstudy terms and conditions state that if the mileage is not topped up then the policy would be cancelled once the mileage allowance had run out.

However, this was a 12 month policy paid in full and I have six months left. The amount seems very high – is this standard pricing?

Grace Gausden, This is Money, replies: Opting for a telematics policy when getting your first car can be a good idea as it can significantly reduce premiums for younger drivers which are traditionally very high.

These policies, also known as black box plans, involves having a small device fitted in your car that will measure how well you drive. It will monitor how fast you are going, how far you travel and how harsh or smooth your braking is. 

You paid £1,200 last September which, after comparing online, seemed a reasonable amount and agreed with the insurer to stick to an 8,000 mile limit.

You haven’t said whether this was recommended to you or if you simply believed you would drive under this amount but By Miles, the pay per mile insurer, projects the average motorist would have driven 6,970 miles in 2020.

It based this on 2015 to 2019 data but said it was likely this number would be lower for many due to the pandemic.

Therefore, unless you have a job that requires regular driving or travelling long distances, 8,000 miles is quite a distance to cover in six months.

Either way, you realised that you were going to run out of mileage so contacted Markerstudy which quoted you £688 to add an 2,000 extra miles and £996 for 5,000 miles – nearly double the entire cost of your insurance.

As per their terms and conditions, your policy would be terminated if you went over the agreed amount.

One driver paid for a whole years insurance upfront but had to take out a second one halfway

One driver paid for a whole years insurance upfront but had to take out a second one halfway

You did not want to lock the car up in the garage for the rest of the policy term as you needed the vehicle so you asked if it would do a midterm policy change to switch to a different one to enable some extra miles, but the broker never called back. 

Markerstudy were also supposed to contact you 90 days into the policy to discuss if the mileage would be sufficient or find out if it needed to be increased but you never heard from it or Sterling.

Obviously, you did not want Markerstudy to cancel your policy as your driving record would show you had a cancelled plan which would undoubtedly hike the cost of any further premiums.

Therefore, you cancelled the policy to end at the beginning of April before your miles ran out and took out a new one with all the extra expense this has incurred.

This is Money contacted Markerstudy to find out why the costs were so high and whether it would refund you any of the six months you were without the policy.

A Markerstudy spokesperson replies: The policy in question is designed for those who are looking to benefit from the option of limited mileage, the amount which is pre-agreed at inception. 

Following communication from the policy holder to Sterling Insurance that she would like to extend the mileage, a fee was calculated. The top up mileage calculations are fixed and the figure it is added to is unique to the client based on the risk criteria they present.

In this case, we would like to apologise to the policy holder as due to human error at Sterling Insurance, the prices calculated were incorrect and should be £208.47 for 2,000 additional miles and £444.56 for 5,000.

As the customer has cancelled her policy effective from 1 April 2021, she is due a pro rata refund of £305.74, however Sterling will be in touch with the customer to discuss the case and see if she would like to reinstate her cover based on the revised premiums. 

Drivers are told to overestimate their mileage as the roads get busier as we leave lockdown

Drivers are told to overestimate their mileage as the roads get busier as we leave lockdown

Grace Gausden, This is Money, adds: You have also told me an extra £250 has now been offered, meaning you have a refund totalling £555.74. 

Whilst this case has been resolved, This is Money contacted several major car insurers to see if they could advise what the average driver estimates their mileage to be and how motorists can work theirs out. 

An Admiral spokesperson replies: Annual mileage is one of the things all insurers ask when someone takes out any policy, but we appreciate it can be difficult to calculate exactly how far you expect to drive in the following year, particularly if you’re new to driving.

The reason mileage is relevant to the price someone pays for their insurance is because the more miles you drive a year, the higher the risk you could be involved in an accident. 

It’s important not to underestimate your mileage, but to try and be as accurate as possible. However, if your actual annual mileage is slightly higher than what you’ve declared, it’s unlikely to be a problem.

Historically the average annual mileage our customers declare they drive is 7,500, this is slightly lower for under 21s and over 60s.

If you’re an experienced driver, and you’ve had your car for a while, the easiest way to calculate your mileage is to check your car’s last few MOTs which will display the mileage at that time, then work out an average, but if you’re a new driver that’s not an option.

The best way to calculate your mileage is to think about the regular trips you expect to make in a week, commuting, driving the kids around, trips to see friends and family, shopping etc. Times that by 52, for the weeks in a year. 

Then think about how many other trips you expect to make in the year, how often do you go on outings and holidays? You should be able to come to a decent estimated figure.

One thing to consider is if your driving pattern might change, for example if you get a new job that involves more driving or start a long-distance relationship. Have a think about whether it will affect your annual mileage.

Obviously annual mileage has been lower over the last year as people were staying at home due to the pandemic. As we come out of lockdown it’s likely that people will be eager to get out and about and so their annual mileage over the next year will probably be higher than last year. 

It’s probably better to slightly overestimate the miles you expect to drive to take into account any unexpected trips. 

Motorists are urged to take into account if they plan to drive on holidays into their mileage

Motorists are urged to take into account if they plan to drive on holidays into their mileage

Alex Borgnis, head of motor underwriting at LV= General Insurance replies: According to government data the vast majority of UK road users drive between 6,000 to 12,000 miles a year, but there’s no exact science when it comes to estimating your mileage as it depends on the driver.

When customers are applying for car insurance on our website we offer help working it out, based on responses to three questions – how many miles are likely to be driven on a normal weekday, the weekend and on holiday or other occasions. 

This then calculates an approximate amount for their total mileage for the year and hopefully gives drivers peace of mind that they’re providing an accurate total that is in line with their circumstances.

Ryan Fulthorpe, motoring expert at GoCompare, adds: It’s worth spending a bit of time thinking about your mileage when you’re buying a car and taking out car insurance. 

Whilst you don’t need to have the exact number, it’s important not to under-estimate, particularly with telematics policies as you may have to pay later down the line. 

Insurers can charge more as your mileage increases because your chance of getting into an accident increases the more you are on the road. Equally, if you over-estimate, you may pay too much for your premium.

If you’re unsure, it’s always worth contacting your insurer who may be able to help you with estimating a mileage and making sure that you’re not in danger of invalidating your insurance or any potential claims.

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