Paul Sanchez
Pay-per-mile insurance is a type of car insurance policy that calculates your premiums based on the number of miles you drive. It is best suited for people who drive very little, such as those who work from home, take mass transit, or have a secondary car that isn't frequently used. The less time spent driving, the lower the risk of accidents, which results in lower insurance costs. However, pay-per-mile insurance may not be ideal for those who take long-distance trips, desire more coverage options, or are uncomfortable with their driving behaviour being tracked. Additionally, it is important to note that not all insurance providers offer pay-per-mile plans, and the availability may vary depending on your location.
| Characteristics | Values |
|---|---|
| Who is it for? | People who drive less than 10,000 miles per year, such as retirees, students, and people with short commutes or who work from home. |
| Cost | The monthly base rate remains the same, while the monthly mileage rate varies depending on how many miles you drive. |
| Savings | You can save money up to 40% or more compared to traditional insurance, but only if you don't drive regularly. |
| Coverage | You can get the same level of coverage as traditional insurance, including comprehensive and collision insurance. |
| Tracking | Insurance companies use technology such as mobile apps, plug-in devices, or odometer photos to track your mileage and, in some cases, your driving behaviour. |
| Drawbacks | Limited availability, possible upfront payments, extra work of tracking mileage, potential privacy concerns, and the possibility of higher rates or loss of eligibility if driving quality is poor. |
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What You'll Learn
Who is per-mile insurance best suited for?
Per-mile insurance is best suited for people who drive less than 10,000 miles per year. This could include those who work from home, take mass transit, walk, or use another mode of transportation, or have a second vehicle they rarely use.
Pay-per-mile insurance is also a good option for retirees, students, or people with short commutes. For example, if you work from home and only use your car for errands, or if you live in an area with good public transportation and only need your car occasionally.
Additionally, if you have a secondary car that doesn’t get much use, you can consider getting a separate pay-per-mile policy for just this car.
On the other hand, you probably won’t benefit from a pay-per-mile policy if you have a long work commute, enjoy taking road trips, don’t have access to other forms of transportation, or are uncomfortable with your insurance company tracking your driving behaviour.
It's also important to note that not all insurance providers offer pay-per-mile plans, so you may need to shop around to find one that suits your needs.
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How much can you save with per-mile insurance?
The amount of money you can save with per-mile insurance depends on how much you drive. The less you drive, the more you can save. According to some carriers, you can save up to 40% or more with per-mile insurance. However, this type of insurance is only suitable for people who don't drive regularly.
For example, if you drive less than 10,000 miles a year, you might consider pay-per-mile insurance. The average American drives over 14,000 miles per year, so if you're driving less than 10,000 miles, you're a low-mileage driver. This means that you can save money with per-mile insurance, as you're paying for the mileage you drive.
Some companies, like Metromile, specialize in this type of insurance, while some large insurers, such as Allstate, also offer a per-mile option. The monthly cost of pay-per-mile car insurance is $55, but the average car insurance premium is about $192 per month. However, this comparison may not be accurate due to variables such as the type of car and the motorist's driving record.
Pay-per-mile insurance is best suited for people who drive very little, which may include those who work from home, take mass transit, or have a second vehicle they rarely use. It's important to keep track of your mileage before trying a pay-per-mile plan, as this will allow you to better estimate what your rate will be.
In addition to mileage, other factors such as age, location, car model, and driving quality may also impact your monthly rate.
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How does per-mile insurance work?
Per-mile insurance is a type of car insurance policy that calculates your premiums based on the number of miles you drive. The less you drive, the less you pay. It is best suited for people who drive very little, such as those who work from home, take mass transit, or have a secondary car that they rarely use.
The monthly cost of per-mile insurance consists of two rates: a base rate and a per-mile rate. The base rate is determined using factors such as age, location, and driving history, similar to a traditional insurance quote. The per-mile rate is then multiplied by the number of miles driven in a given month to calculate the total monthly premium.
Insurance companies use technology known as "telematics" to track mileage. This can be done through a mobile app, a plug-in device in the car, or odometer photos. Some apps and plug-in devices can also track driving habits such as speed, braking, and phone use, which may impact the cost of insurance.
Overall, per-mile insurance can be a cost-effective option for low-mileage drivers, but it is important to shop around and compare quotes from different insurers to find the best policy.
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Pros and cons of per-mile insurance
Per-mile insurance is a type of insurance policy designed for low-mileage drivers. It can be a good option for those who don't drive a lot and are looking to save money on their car insurance. The pros and cons of per-mile insurance are discussed below.
Pros of Per-Mile Insurance
- Lower Costs: Per-mile insurance can potentially reduce costs for drivers who don't rack up a lot of miles. According to some providers, it could be up to 40% cheaper than traditional insurance.
- Full Coverage: Per-mile insurance usually offers the same coverage as traditional insurance, including liability coverage, comprehensive and collision coverage, rental car reimbursement, and roadside assistance.
- Mileage Caps: Some per-mile insurance policies have daily mileage caps, so you don't get charged extra if you occasionally drive more miles in a day.
- Greater Control: With per-mile insurance, you have more control over the cost of your coverage, as the amount you pay is directly linked to how much you drive.
Cons of Per-Mile Insurance
- Limited Availability: Per-mile insurance is not widely available, and not all insurance companies offer this type of policy.
- Upfront Payment: Some per-mile insurance policies may require you to pay your premium upfront instead of making monthly payments.
- Privacy Concerns: Per-mile insurance requires insurers to track your mileage, usually through a device installed in your car or a mobile app. This may raise privacy concerns for some people, as these devices can collect data beyond just mileage, including speed, braking, and the time of day you drive.
- Not Cost-Effective for Higher Mileage: Per-mile insurance is most beneficial for those who drive 10,000 miles or less per year. If you drive more than that, a traditional insurance policy may be more cost-effective.
- Loss of Discounts and Coverage: Switching to a per-mile insurance policy may result in losing important discounts or coverage that you have with your current insurance provider.
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Per-mile insurance companies
Per-mile insurance is best suited for people who drive very little. This includes people who work from home, attend college, are retired, use mass transit, or have a second vehicle they rarely use.
There are only a handful of insurers that offer per-mile insurance options. Some companies, like Metromile, specialize in this type of insurance, while some larger insurance providers, such as Allstate, also offer a per-mile option.
Nationwide, for example, offers a pay-per-mile insurance program called SmartMiles. This program is most beneficial for people who drive less than 8,000 miles annually. Customers pay a monthly base rate, which stays the same, plus a monthly mileage rate, which can change. The monthly base rate is determined by factors such as gender, age, and car make and model.
Another example of a company that offers per-mile insurance is The Zebra. They offer a licensed insurance professional to help you compare insurance policies and find the best option for you.
It is important to note that per-mile insurance may not be available in all states, and there may be drawbacks such as limited availability and upfront payments rather than monthly payments.
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Frequently asked questions
Pay-per-mile insurance is a type of car insurance policy that calculates your premiums based on the number of miles you drive.
Pay-per-mile insurance customers pay a monthly base rate, which stays the same, plus a monthly mileage rate, which can change. The rate consists of two rates: a base rate and a per-mile rate.
Pay-per-mile insurance is best suited for people who drive very little, including those who work from home, take mass transit, or have a second vehicle they rarely use.
Insurance companies use technology known as "telematics" to track how far you drive, using an app or a device that plugs into your car.
Pay-per-mile insurance can be worth it for people who drive less than 10,000 miles per year. It can save you money, but only if you truly don't drive regularly.
