Pay per mile insurance is a car insurance policy that provides comprehensive and collision coverage while charging you by the mile for your policy. Some companies refer to this type of insurance as low-mileage insurance or pay-as-you-go auto insurance.
Advantages of Pay Per Mile Insurance
If you opt for a pay per mile insurance policy, you’ll pay less for your insurance the less you drive. According to NerdWallet, auto insurance companies consider drivers who spend less time on the road are less riskier to insure. Drivers who spend more time on the road are more likely to have an accident, so they’re more likely to file a claim. Insurance companies tend to favor drivers who file fewer policies.
NerdWallet points out that even if you end up driving a few more miles a month than usual, you can still save hundreds of dollars a year on a pay per mile policy. That’s because your insurance company will charge you pennies per mile on top of a small base rate.
How Does Pay Per Mile Insurance Work?
If you sign up for a pay per mile insurance policy, your insurance company will charge you a small base rate per month and a per-mile rate. According to Insurance.com, most companies put a cap on how many miles you can drive, usually around 250 miles a day. When calculating your base rate, your insurance company will factor in your gender, age, and what type of vehicle you drive. The Zebra points out that while you’ll pay less for pay per mile insurance than traditional car insurance, you’ll still receive the same coverage.
To track how many miles you drive, insurance companies use telematics. For example, if you sign up with Metromile, you can use the company’s “Ride Along” mobile phone app. ValuePenguin notes that Metromile tracks your driving habits to calculate your monthly bill and to see if you’re eligible for renewal. If you’re uneasy about sharing your data through an app, you can go with a company like Mile Auto. They allow drivers who enroll in their pay per mile insurance program to send in a photo of their odometer.
Because different drivers have different needs, there are things to consider before signing up for pay per mile insurance. NerdWallet recommends that you inquire about the following factors:
- Mileage Caps – If your insurance company puts a cap on your mileage, does your daily driving routine fit within the parameter? If not, you may not save money.
- Tracking Device – What kind of tracking device does your insurance company use? They may require you to install a plug-in device in your car, or you might have to use their mobile phone app. Other companies only require a photo of your odometer.
- Device Linkage – Does your insurance company’s plug-in device or app link to a specific driver? This is something to consider if other family members drive your vehicle, which could cause your mileage to go up.
- Information Tracking – What information does your insurance company track? Some companies only care about mileage, while other companies want to know where you drive and how you drive.
- Driving Behavior – Will your insurance company adjust your rates based on your driving habits? If you have excellent driving habits, it’s worth seeing if your company tracks your driving behavior and is willing to give you a discount. You should also find out if poor driving habits will trigger an increase in your rates.
Pay Per Mile Insurance: Pros vs. Cons
As Benzinga points out, there are advantages to participating in a pay per mile insurance program. On average, if you only drive occasionally, you’ll end up saving up to $500 a year. If you have to adhere to a mileage cap, you’ll spend less time on the road, meaning you won’t spend as much money on fuel, and you’ll cause less wear and tear on your vehicle. You’re also at less risk of getting into an accident. However, The Zebra suggests that you consider these potential drawbacks:
- Availability – Because each state has specific car insurance requirements, pay per mile insurance may not be available where you live.
- Payout Ability – Many companies that offer pay per mile insurance and telematics pricing scales are new to the industry. It’s unclear whether these startups and young companies have the financial strength to pay your claim.
- Inefficient Claim Process – Even if your company can pay your claim, you may have to wait longer than if you went with traditional insurance. Some customers have noted that new insurance companies often have slow and inefficient claim processes, usually because they’re still ironing out the details.
Companies That Offer Pay Per Mile Insurance
According to ValuePenguin, there are several companies that provide pay per mile auto insurance policies. These include:
- Allstate – Allstate’s pay per mile program, known as Milewise, charges drivers a base rate and a fee for each mile a customer drives. Users install a plug-in device that tracks mileage and helps them achieve weekly mileage goals. Drivers, on average, save up to 20% for 10000 miles. Allstate’s Milewise program is available to motorists who live in Arizona, Delaware, Florida, Idaho, Illinois, Indiana, Massachusetts, Maryland, New Jersey, Ohio, Oregon, Pennsylvania, Texas, Virginia, Washington, West Virginia, and Washington, DC.
- Metromile – Metromile, a company specializing in pay per mile insurance, calculates insurance rates using a driver profile and monthly mileage. Drivers track their mileage with a wireless device that plugs into the car’s OBD-II port. Metromile customers can save up to $741 a year. Metromile offers liability, uninsured motorist coverage, collision, and comprehensive coverage in Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington.
- Nationwide – Nationwide’s Smartmiles program is an excellent option for drivers who don’t have a long commute or drive infrequently. Drivers can use a mobile app to track their mileage or a plug-in device if they want an additional safe driver discount. Safe drivers can save an extra 10%. The Smartmiles program is available in 32 states and is compatible with most vehicles manufactured after 1996.
These are just three of the many insurance companies that offer pay per mile insurance. Now that you know the benefits and disadvantages of a pay per mile policy, you can decide if it’s right for you.
Sources:
Pay-Per-Mile Car Insurance: What You Need to Know
Pay per mile car insurance rates
Should You Switch to Pay-Per-Mile Car Insurance?
Best Pay Per Mile Car Insurance
Does Insurance Follow the Car or the Driver?
How Much Does Car Insurance Cost?
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