How Much Money Can I Save With Pay-Per-Mile Auto Insurance?

Auto insurance is a cost no driver can escape. If you own and drive a vehicle, you have to pay car insurance costs monthly or annually – and those costs can be very expensive. The average American driver pays over $1,500 per year for auto insurance. In some states, that cost can be even higher. But there’s a new kind of auto insurance that’s changing everything.

This new insurance option is making auto insurance premiums cheaper, and it’s giving drivers a break. It’s called pay-per-mile insurance. And unlike traditional auto insurance, these policies only charge you for the miles you actually drive.

Could you save money by switching to pay-per-mile auto insurance? Here’s what you need to know about this new kind of insurance policy.

How Pay-Per-Mile Insurance Works

Pay-per-mile auto insurance works differently than traditional auto insurance. While traditional auto insurance bases your premium rate on a number of factors like age, vehicle type, location, and more, pay-per-mile insurance is more simplified.

A pay-per-mile auto insurance policy charges you a fixed base rate and a per-mile rate. The fixed base rate is determined by your driving history, vehicle type, and location. It usually costs about $20 per month or more. Your insurance company will then provide you with a wireless device that plugs into your vehicle, and that device tracks how many miles you drive.

Depending on how many miles you drive in a given day, week, or month, your insurance rate will change. The monitoring device will report your mileage to the insurance company, and you’ll be billed based on how much you’re on the road. The per-mile rate is usually a few cents per mile, such as 4 cents per mile.

It’s essentially usage-based insurance: you pay only when you use your vehicle, not when it’s parked in your driveway. And for drivers who aren’t on the road often, pay-per-mile insurance can potentially offer significant savings.

Should You Make the Switch to Pay-Per-Mile Car Insurance?

Some drivers might benefit from switching to pay-per-mile car insurance. But is it a smart choice for you? It depends on your driving behavior.

The people who will see the biggest benefit from pay-per-mile car insurance are those who drive less miles than the national average. Most American drivers rack up 12,000 miles per year, or 1,000 miles per month. If you drive this average each year or month, you’ll likely find pay-per-mile insurance to be too expensive. But if you aren’t hitting 1,000 miles or more each month on the road, you could save.

For example, a pay-per-mile policy with a base rate of $40 and a per-mile rate of six cents could offer big savings. If you drive 500 miles a month, you’d pay $70 per month in total. But if you drive 1,000 miles per month, you’d pay $100. That’s a total of $840 versus $1,240 in auto insurance costs each year.

Here are a few types of drivers who could see savings by switching to pay-per-mile insurance:

  • Individuals who work from home.
  • College students.
  • Retirees.
  • Those who only drive on Sundays.
  • Individuals with a second car that’s rarely driven.
  • Drivers who don’t want to be penalized for their driving behavior, or who have a poor driving record.
  • Leaseholders whose cars have low mileage limits.

The key to determining whether pay-per-mile insurance is right for you? Accurately estimating your driving habits. If you underestimate how many miles you drive, you could wind up paying more. Calculate your average mileage for a month, and see what your potential savings might be.

The Best Pay-Per-Mile Insurance Companies

If pay-per-mile insurance could save you money, you need to shop around before you choose a new auto insurance policy. Not all insurers offer pay-per-mile insurance, and these policies are currently only available in select states.

Check out the following four companies that offer pay-per-mile auto insurance. Right now, they’re among the best of the best.

Metromile

Metromile offers pay-per-mile insurance policies that feature a rate based on your driving profile and your monthly mileage. The Metromile Pulse is used to track and calculate your monthly mileage, and you can easily monitor how much you’re driving via the Metromile app to ensure you’re saving money. Drivers can get coverage for common auto insurance needs through Metromile, including liability, uninsured motorist, collision, comprehensive, and more.

Allstate Milewise

Allstate, one of the nation’s most popular auto insurance companies, offers a pay-per-mile policy called Milewise. With this policy, you’ll be charged a daily base rate plus a per-mile rate for a total cost per day rather than a monthly cost. You attach the Milewise device to your car’s steering column, and it’ll calculate your rate each time you get behind the wheel. Pay-per-mile policies include the same reliable coverage and claims process as any other Allstate insurance policy.

Nationwide SmartMiles

Another reputable insurance company popular across the country, Nationwide now offers a pay-per-mile auto insurance policy called SmartMiles. With a SmartMiles policy, you’ll pay a base rate and a variable rate, which is the cost per mile. It includes the same perks and potential savings you’d get with a traditional Nationwide auto insurance policy too, like a safe driving discount of 10 percent, a road trip exception (free 250 miles), and online mileage tracking.

Do Your Research Before You Make the Switch

Pay-per-mile auto insurance could be a smart financial move. If you’re someone who isn’t driving very frequently, switching to a pay-per-mile policy could return significant savings. And it could be a fantastic way to reap the benefits of being on the road less frequently.

To find the right pay-per-mile policy with the biggest potential savings, you’ll need to do your research. Search for pay-per-mile auto insurance in your area to see if it’s available. Then, get price quotes or estimates online and compare each insurance company. That’s the best way to ensure you’re paying a low price that suits your budget and your driving mileage.

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