Pay-per-mile Car Insurance

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Whether it’s a magazine subscription or a gym membership, nobody wants to pay for something they never use. Despite this, we often keep paying for certain services, convincing ourselves that someday we’ll make good use of them and that when such a day comes, we’ll be glad that we held onto our subscription. It would be so much nicer if, instead of flushing money down the drain month after month, we only paid for a service if we used it. While this concept is merely a pipe dream in most circumstances, it’s possible for car insurance. Welcome to the world of car insurance by the mile.

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What is Pay-Per-Mile Car Insurance?

Starting with a base rate that is calculated using factors such as your age, your credit score, your driving history, the kind of car you drive and your gender, insurance providers charge you a monthly premium that is a combination of your base rate and the total amount you drive.

To calculate the latter component, insurers use an in-car device that tracks the number of miles you log each month. These miles factor into your annual mileage, which ultimately becomes a factor—though not a major component—in your overall premium. Taking all of this into account, insurance providers come up with a premium that reflects your driving habits, which is what you end up paying each month. If you don’t drive at all, you pay the base rate. If you do venture out onto the open road, your monthly premium reflects your mileage and includes a daily mileage ceiling above which you won’t be charged.

Pay-Per-Mile Car Insurance Companies

Nationwide SmartMiles

SmartMiles by Nationwide offers the same coverage as a traditional Nationwide car insurance policy with the caveat that its rates adjust each month based on how much you drive. Some special features of Nationwide’s SmartMiles coverage include:

  • Safe driving discounts of up to 10% after the first renewal
  • A “Road Trip Exception” that only charges you for the first 250 miles you drive on any given day
  • Easy-to-use online tools that help you keep track of your mileage and monthly payments

With the exception of a few hybrids and diesel engine vehicles, this pay-per-mile insurance can be used by all drivers with post-1996-model cars.

Metromile

With rates starting as low at $29 per month, Metromile offers an affordable alternative to other car insurance providers. Like Nationwide, Metromile also features a 250-mile per day mileage cap (150 miles per day in New Jersey), which enables infrequent drivers to indulge in guilt-free road trips on the weekend. Metromile offers an extensive list of coverage options, which includes:

  • Rental reimbursement
  • 24/7 Roadside assistance
  • Property damage
  • Bodily injury
  • Comprehensive
  • Under/uninsured motorist
  • Medical payments coverage

Users can select some or all of these car insurance by the mile coverage options as part of one of four different levels of liability protection and may add more than one vehicle to a policy, which saves them money on their base and per-mile rate.

Though Metromile has limited availability (CA, IL, NJ, OR, PA, WA and VA), it offers automatic billing and easy-to-use online resources for handling payments, which makes it an attractive option for users that are residents of states where it is available.

Esurance Pay Per Mile

Pay Per Mile by Esurance offers many of the same functions as the other pay-per-mile car insurance providers listed here. Their premiums, which are paid eight times over a six-month span, are composed of a base and per-mile rate and include a mandatory down payment at the start of each policy term cycle. In addition to this, Esurance charges a $50 cancellation fee if you terminate your policy early, though this can be waived if the policyholder switches to a traditional, unlimited miles Esurance policy.

Generally, most pay-per-mile users are scared away from Esurance’s offerings due to the fact that, for the moment, its Pay Per Mile program is only available to users living in Oregon. This may change in the near future, but for now, if you’re not an Oregon resident, you may need to look elsewhere for your pay-per-mile auto insurance.

Allstate Drivewise

Drivewise by Allstate is different from the norm as far as pay-per-mile insurance programs go. In addition to tracking the number of miles that you drive in a day, it also keeps tabs on how fast you drive, the number of times you brake hard, the time of day that you drive and the areas in which you drive.

Billing is also done a bit different with Drivewise, in that users pay a deposit and then have money deducted from that amount in the form of base and per-mile rates. When the deposit amount gets close enough to zero, users are automatically billed and the deposit gets replenished.

In addition to the standard liability coverage that is offered, Drivewise appeals to drivers because of the low mile limit ceiling—150 miles per day—and the opportunity it gives drivers to save if they keep their miles low.

One thing that drivers won’t be too fond of, however, is Drivewise’s limited availability. As of now, only residents of New Jersey, Oregon and Texas have access to this pay-per-mile service, though this may change soon.

Who should use pay-per-mile insurance?

Pay-per-mile car insurance clearly isn’t for everyone. Apart from the aforementioned geographic restrictions that apply to some providers, the per-mile basis on which premiums are calculated makes pay-per-mile insurance an unattractive option for users that drive a lot.

By way of example, a sample rate from Metromile quotes their premiums at least $29 per month as a base rate plus six cents per mile driven. Taking into account the fact that the average American drives 13,476 miles per year, this policy would end up costing users over $1,150 per year, which is more than $200 over the national average, according to 2016 figures.

With this in mind, people who know that they have to log a lot of miles behind the wheel likely aren’t the best candidates for this kind of insurance. On the other hand, if you live in an urban area or have circumstances that don’t require you to use your car often, pay-per-mile insurance could be an excellent way to save money on monthly auto insurance premiums.

How much can you save with pay-per-mile insurance?

The main factor in determining how much you can save with car insurance by the mile is the number of miles you plan on logging. In revisiting the Metromile example, if you are able to stick to an average of 25 miles per day, you’d end up paying just under $900 per year in auto insurance, which would yield you a modest chunk of change in savings compared to the national average.

To have a clearer idea of what you could save, however, your best bet is to solicit quotes from traditional auto insurance providers and pay-per-mile insurers and use your estimated annual mileage as a predictive marker in calculating how much each option might cost you.

Frequently asked questions

What’s the difference between pay-per-mile and pay-as-you-drive (telematics) insurance?

Pay-as-you-drive models use a telematics device to monitor your car. By using this technology, drivers have the chance to potentially earn a larger discount by driving less and being more cautious on the road. The point of these devices is to track a driver’s driving patterns as a means of gauging of cautiously or recklessly a user drives. The devices track speed, hard braking and a few other factors to determine how much a driver is eligible to save for safe driving.

Pay-per-mile insurance is only calculated using a base rate and a per-mile rate. Thus, how recklessly or safely you drive have no bearing on what you pay at the end of each billing cycle.

Can I cancel my pay-per-mile insurance at any time?

Though all users have the right to cancel their pay-per-mile insurance policies whenever they like, doing so often comes with fees. Esurance, for example, charges policyholders a $50 cancellation fee if they terminate their policies early. This fee can be waived if the policyholder switches to a traditional, unlimited miles policy. To find out whether your provider will charge you to cancel your policy, reach out to a representative.

Does pay-per-mile have the same coverage as a traditional policy?

Yes. The coverage offered with a pay-per-mile policy is the same as that provided under a traditional policy with the exception that the payment structure is different. While a traditional policy will charge you a monthly premium based on factors such as the make and model of your vehicle, your age, your driving history and health-related factors that could impact your ability to drive safely, a pay-per-mile policy charges drivers a substantially reduced base fee along with a per-mile fee that is usually capped at a certain per-day mileage limit.

How are my pay-per-mile premium rates calculated?

Pay-per-mile premium rates are made up of two components. The first is a base rate, which is applied at the discretion of the provider. The second component is a rate applied to the number of miles you drive during a billing cycle. This rate is determined based on factors such as your age, driving history, credit score, make and model of car and gender, among other factors. Combined, these two factors make up your monthly premium.

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