Pay-per-mile Car Insurance: A Detailed Review

Pay-per-mile car insurance is a innovative insurance model where your monthly premium is determined by the number of miles you drive, providing a potentially cost-effective option for drivers who don’t rack up a lot of miles on the road.

Key Takeaways

  • Pay-per-mile car insurance sets premiums based on driving distance.
  • Ideal for those driving infrequently or covering short routes.
  • Offered by both mainstream insurers and specialists in this niche.

What is Pay-per-mile Car Insurance? 

Pay-per-mile car insurance is a unique coverage option where you’re charged based on how much you drive. Essentially, you pay a basic rate plus an additional charge for each mile you drive. This policy offers typical car insurance benefits like liability, collision, and comprehensive coverage.

If you’re someone who doesn’t drive much, say less than the U.S. average of 13,400 miles annually as noted in 2022, this might be a cost-saving option for you. For instance, Metromile, a company offering this service, suggests potential savings for drivers covering less than 10,000 miles a year.

So, how is the cost determined? First, there’s a base rate influenced by factors such as where you live, your car’s details, your driving record, and the coverage you choose. After that, you’re charged a small amount for each mile driven, making it tailored to your actual usage.

How does Pay-per-mile Auto Insurance Work? 

Pay-per-mile car insurance uses a mobile app or a small device in your car to track how much you drive. This device, often tucked under your steering column, counts your miles and sends this info to your insurer. 

How does Pay-per-mile Auto Insurance Work?

However, it’s crucial to know that some of these devices might also monitor when you drive, your speed, and how often you brake. Before choosing an insurance company, ensure you’re comfortable with the data they’ll collect.

While pay-per-mile insurance charges you based on distance driven, there’s another kind called usage-based insurance. This type doesn’t just look at distance; it checks how safely you drive and might offer safer drivers lower rates.

Who Should Get Pay-Per-Mile Car Insurance?

If you don’t drive often or only go short distances, pay-per-mile insurance might be right for you. This could be a great fit for college students, retirees, those working from home, or frequent public transit users. Moreover, if you have multiple cars and some are rarely used, this type of policy can be beneficial. Mile Auto, a pay-per-mile insurer, recommends considering this option if you drive less than 10,000 miles annually.

However, if you’re not ready to switch but still drive infrequently with your traditional car insurance, don’t forget to ask about low-mileage discounts. Many companies offer reduced rates for those driving fewer than 8,000 to 10,000 miles each year.

Is Pay-per-mile Car Insurance Worth It? 

Absolutely, pay-per-mile car insurance can be a game-changer for some, but it’s essential to weigh its benefits against potential downsides.

Is Pay-per-mile Car Insurance Worth It? 

Pros of Pay-Per-Mile Car Insurance:

  • Cost Savings: If you drive infrequently or have short commutes, you could save significantly on your premiums compared to a traditional flat-rate policy.
  • Flexibility: You only pay for what you use, making it a fairer system for low-mileage drivers.
  • Encourages Less Driving: Pay-per-mile policies can motivate individuals to drive less, which is better for the environment and can reduce traffic congestion.
  • Transparent Pricing: With the mileage being the primary factor, pricing is often more straightforward and predictable for the policyholder.
  • No Long-Term Commitment: Some providers may offer more flexible terms without locking you into a long-term contract.

Cons of Pay-Per-Mile Car Insurance:

  • Not Suitable for Frequent Drivers: If you drive a lot, your costs could be higher than with a traditional policy.
  • Privacy Concerns: To track miles, insurers use devices or apps that may also monitor driving habits, raising concerns about data privacy.
  • Potential for Additional Fees: Some insurance providers might charge fees if the tracking device is lost or broken.
  • Limited Availability: Not all insurance companies offer pay-per-mile policies, and they may not be available in all states or regions.
  • Unpredictable Monthly Costs: While you might have a base fee, the variable nature of the mileage charge can make monthly bills fluctuate.

Can you Save with Pay-per-mile Insurance?

The price of pay-per-mile insurance can differ depending on the insurance company and how much you drive. Just like regular car insurance, your driving history and personal details are used to figure out your starting monthly cost.

Can you Save with Pay-per-mile Insurance?

Don’t immediately believe the savings a company promises. To know if you’ll really save compared to your current insurer, you’ll have to do the math after you get a quote.

To estimate how much you’ll pay for pay-per-mile insurance, use this formula: Start with the monthly base rate and add the per-mile rate multiplied by how many miles you drive each month.

For example, if your pay-per-mile quote shows a $34 monthly base rate and a per-mile rate of 5 cents, and you usually drive 800 miles a month, you can calculate your monthly cost like this: $34 + (0.05 x 800) = ($34 + $40) = $74.

Remember, this is just an estimate. The actual cost can vary based on how much you drive.

If you don’t want to keep track of your miles manually, Metromile offers a “Ride Along” program. They’ll monitor your driving for about two weeks using their app and give you an estimated bill based on your driving habits. Using this feature doesn’t mean you have to switch to Metromile; it’s just a helpful tool to understand your costs.

Pay-Per-Mile Auto Insurance: FAQs

Does pay-per-mile auto insurance include full coverage car insurance?

Indeed, “full coverage” usually encompasses liability, collision, and comprehensive insurance. With a pay-per-mile plan, you’re not just paying based on the distance you drive; you can still have the peace of mind offered by a comprehensive insurance package, as these coverages can be integrated into such a plan.

Can I get car insurance discounts with pay-per-mile auto insurance?

When considering pay-per-mile auto insurance, you might be eligible for discounts based on the provider. For instance, Nationwide SmartMiles and Metromile both grant discounts for safe driving. Plus, Metromile gives a discount for insuring multiple vehicles. If you’re pondering a switch to such a plan, always check which discounts might apply to you.

What’s the difference between pay-per-mile auto insurance and usage-based insurance?

Metromile’s insurance plan in Arizona, Illinois, Oregon, and Virginia works like this: You start with a base monthly rate of $29, and then you pay an additional 5 cents for every mile you drive. But here’s the cool part – they also look at how you drive. If you drive safely, which means no speeding or harsh braking, and if you drive during safe times of the day and week, they’ll lower your insurance cost even more. So, if you’re a safe driver, you can save even more money on your car insurance in these states with Metromile.

Final Thoughts

In conclusion, pay-per-mile car insurance offers a flexible and potentially money-saving alternative for drivers who want to tailor their insurance costs to their actual usage, providing a promising option in the evolving landscape of auto insurance. By paying for what you use, it can lead to greater affordability and fairer pricing for many policyholders.

Leave a Reply