What is Pay-per-mile Insurance?
Pay-per-mile insurance is car insurance that is based on the number of miles you drive. Unlike traditional car insurance policies, pay-per-mile insurance bases the cost of the premiums on the number of miles driven and not on a set premium. It’s an excellent option for those who don’t drive much or for people who walk, bike, or use public transportation, providing a way to save money on their car insurance.
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Drive Less, Save More — The Appeal of Pay-per-mile Insurance
Car insurance is an essential component of car ownership. By law, all drivers must have a minimum amount of car insurance to protect themselves and others from financial damages in the case of an accident. However, traditional car insurance can be expensive, especially for those who do not drive often. Fortunately, pay-per-mile car insurance offers drivers a more flexible and affordable option.
According to a study by the Federal Highway Administration, the average American driver travels approximately 13,500 miles per year. This means that many drivers are paying for insurance they don’t need. Pay-per-mile car insurance offers a solution to this problem.
How Does Pay-per-mile Insurance Work?
Eligibility Requirements
To qualify for pay-per-mile insurance, you must meet specific requirements. To enroll in a pay-per-mile insurance policy, you must have a car in good condition and drive fewer than 10,000 miles a year. Some insurance companies may have a daily mileage limit.
What Does Pay-per-mile Insurance Cover?
Pay-per-mile car insurance will offer the same coverages as a traditional policy, where you select what coverages you want along with the legally required ones. Liability coverage is provided for bodily injury and property damage where you are at fault in an accident. You may also add physical damage coverage to pay to repair or replace your vehicle (including theft and vandalism). There are also extra bells and whistles to elect, like towing and rental reimbursement.
What’s Not Included in Pay-per-mile Insurance?
Pay-per-mile insurance does not cover you if you drive over your miles cap (whether a daily limit, monthly, or annual). It doesn’t include any extras like roadside assistance, rental reimbursement, or any other add-ons traditional car insurance policies include unless you elect to add them. Keep in mind this may increase your cost.
Types of Pay-per-mile Insurance
There are several different types of pay-per-mile car insurance.
- Traditional PPMI: Traditional pay-per-mile insurance car insurance where you will pay a fixed amount of monthly premiums plus a fee based on the miles you drive. This type of insurance is based solely on the number of miles driven and does not consider other driving factors, such as speed, location, or driving behavior.
- Telematics-based PPMI: Telematics pay-per-mile insurance is a type of car insurance that uses technology to track your driving behaviors, such as speed, acceleration, and braking. It’s based on your driving habits and rewards safe driving behaviors. Usually, it will be a device in your car or an app on your phone.
- Pay-as-you-go PPMI: Pay-as-you-go pay-per-mile insurance is a type of insurance that allows you to pay for insurance only when you use your vehicle using telematics. This type of insurance benefits individuals who use their cars infrequently or have a secondary vehicle.
- Hybrid PPMI: Hybrid pay-per-mile insurance is a combination of traditional and telematics. It allows you to pay a fixed fee for basic coverage and additional charges based on the number of miles driven or your driving habits.
- Personalized PPMI: Personalized pay-per-mile insurance uses telematics technology to track your driving behavior, location, and other factors to create a personalized insurance plan.
How Much Does Pay-per-mile Insurance Cost?
Pay-per-mile insurance can offer a more cost-effective alternative for individuals who don’t drive often. Nonetheless, if you travel extensively for one month, the premium may be costly during that time frame. Conversely, if the next month you drive less, it may cost less.
The cost of pay-per-mile insurance varies depending on the insurance carrier, how many miles you drive annually, and where you live. Pay-per-mile insurance, on average, can cost $40 to $50 per month, with a base rate of $30 to $40 plus a fee for each mile driven.
How to Get Pay-per-mile Insurance
Getting pay-per-mile insurance will be a similar process to traditional car insurance. However, there are only a few companies that offer it right now. To obtain a pay-per-mile policy, do the following:
- Check to see what carriers offer pay-per-mile insurance
- Call the company or complete an online inquiry to get a quote based on the mileage you think you will be driving (you will need your vehicle info, address, and licensing information)
- Review the quote carefully and ask any questions you may have
- Let the carrier know you want to move forward and agree to the terms like mileage cap
- Take whatever steps necessary to provide the mileage info, usually a device or phone app
- Pay your premiums
Should You Get Pay-per-mile Insurance?
Pay-per-mile insurance is only beneficial for some. If you are considering seeing if it will benefit you, it is crucial to understand if it is worth it.
Consider Pay-per-mile Insurance If…
Consider pay-per-mile car insurance if you do not drive often. It may be the best option if you walk to most places, ride your bike, or use public transportation. If you live in a more urban area, you may not need to drive as often as those in a suburban area. Also, young drivers could benefit from this since newer drivers pay more for traditional car insurance.
Advantages of Pay-per-mile Insurance
Advantages of pay-per-mile insurance include paying for only what you use, incentivizing driving less, and flexible payment options. Disadvantages include caps on mileage and limited coverage options.
The affordability of pay-per-mile is a desirable advantage to infrequent drivers. Some drivers may drive less, saving them money and reducing their risk of a car accident. If you decide to use this type of insurance and don’t drive often, you may see that the need for extra coverage is no longer applicable as well.
Disadvantages of Pay-per-mile Insurance
There are some disadvantages with pay-per-mile insurance as well, especially if you commute to work or are a frequent driver. Pay-per-mile will limit the amount you drive, which may be stressful if you get close to the mileage cap.
Some drivers who use their car occasionally may take longer trips when they do, which in turn costs more in the long run. There is either a tracking device or an app that you will need to track the mileage, so privacy is an issue for some.
Alternatives to Pay-per-mile Insurance
As a more frequent driver, if you have determined that pay-per-mile is not for you, there are several alternatives you can consider.
Traditional Car Insurance
Traditional car insurance is a type of policy that covers drivers for a set premium, regardless of how much they drive. The premium is determined by various factors such as the driver’s age, gender, driving record, location, and the type of vehicle being insured. In case of an accident or any other covered incident, the insurance company pays for the damages up to the policy limit.
You would consider traditional car insurance if you drive more mileage than the pay-per-mile carriers limit you to. Track your mileage for a few weeks to easily determine which option is best for you.
Usage-based Insurance
Usage-based car insurance is a policy that charges premiums based on how much the driver uses the car. This policy relies on a telematics device installed in the vehicle that tracks the driver’s behavior, such as their speed, distance traveled, and time of day. The premium is then calculated based on this data.
This is like the pay-as-you-go option mentioned above and is best if you hardly drive. You may only work two days a week and a few miles from home.
Non-owner Insurance
If you don’t have a car but need to use your neighbors or family members occasionally, you may want to consider non-owner auto insurance.
Non-owner car insurance is a policy designed for drivers who do not own a car but still need liability coverage when driving someone else’s car. This policy provides liability coverage for property damage and bodily injury that the driver may cause, but it does not cover damages to the vehicle itself. Whoever owns the car would be responsible for the physical damage portion.
Telematics Insurance
As mentioned above, telematics car insurance is a type of policy that uses telematics technology to track the driver’s behavior and offer personalized premiums. This is done by installing a device in your car or downloading a cell phone app.
The device collects data on driving behavior, such as speed, acceleration, and braking. The data calculates the driver’s risk level and adjusts the premium accordingly. This type of policy is ideal for safe drivers who want to save money on their premiums.
This can also negatively impact your car insurance premiums if you are not a safe driver.
Parting Thoughts
An insurance policy that is paid for by the number of miles you drive is called pay-per-mile insurance. In contrast to traditional car insurance policies, pay-per-mile policies charge premiums based on the number of miles driven rather than a set amount. People who walk, bike, use public transport, or don’t drive often will find it an excellent option. It is a great way to save money on car insurance.
In conclusion, pay-per-mile insurance is an excellent option for people who don’t drive much or use alternative modes of transportation. It can save you money on car insurance premiums and provide incentives to drive less while protecting your car. Consider it if you meet the eligibility requirements and want a more affordable insurance option.