Pay-By-The-Mile Insurance

Most car insurance companies offer low-mileage discounts, but some also offer pay-per-mile policies that can put money back into the pockets of low-mileage drivers. Pay-By-The-Mile Insurance

Got a car that sits in the garage most days? Are you retired, or do you work from home? If so, you may be considering what you can do to save money on car insurance.

Pay per mile insurance may be able to save you money on your car insurance. If you’re driving less and looking for cheaper car insurance, consider learning about Pay per mile car insurance options and seeing if any are available in your area.

If your decreased driving is only temporary, you may be looking for temporary car insurance, which you’ll find, doesn’t really exist. However, Pay per mile car insurance can be a great option to save some money in this case, too.

Read on to learn the details you need to know about pay as you drive insurance options.

What Is Pay Per Mile Insurance

Pay per mile insurance, also sometimes referred to as low-mileage car insurance or pay-as-you-go car insurance, is an insurance policy that offers full coverage — comprehensive and collision coverage — but prices your car insurance by the mile.

With pay per mile insurance, the less you drive, the less you pay. That’s because insurance is priced based on risk, or the likelihood that you will file a claim that the company has to pay.

And, of course, the less you’re out on the road, the less likely you are to have an accident. It’s as simple as that.

Many traditional auto insurers offer what’s known as a low-mileage discount. But this is different. It is a deduction given at the end of the policy year for drivers who log under a set number of miles.

By contrast, Pay per mile insurance is auto insurance by the mile and charges you a certain number of pennies for every mile you drive in a month, on top of a base rate. So if you do log few miles — for example, maybe half the national average of 12,000 miles annually — you could potentially save hundreds of dollars a year on your car insurance.

That’s the magic of low mileage car insurance.

Companies advertise this auto insurance based on mileage to people in cities with good access to public transportation and at-home workers, retirees, college students and others who don’t have a long daily commute.

Mile Auto says that 65% of American drivers log fewer than 10,000 miles a year. “If that’s you, you’re probably paying too much for car insurance,” it says.

How Is Pay Per Mile Insurance Different From Pay As You Drive Insurance?

Pay As You Drive (PAYD) auto insurance is usage-based insurance, meaning it considers how you drive, not just how far you drive.

Because things like speeding and hard braking are associated with higher accident rates, drivers who do things like maintaining lower speeds and brake softly — actions tracked by a dashboard device — are charged less. Usage-based insurance programs sometimes also factor in the number of miles driven, but they are not limited to miles only, as is Pay per mile insurance.

“Drivers who pose the least risk save the most,” says Michelle Megna, the managing editor of Insurance.com. “Pay per mile and pay as you go programs are a way for insurance companies to seek out lower-risk drivers.”

How Does Pay Per Mile Insurance Work?

Insurance by the mile is only partly based on how many miles you drive.

First, the insurer creates a base rate based on standard insurance variables such as your age and your driving and claims history, the type of vehicle you drive and where you live, and, in most states, your credit history. This base rate depends on how other, similar drivers behave and can change each year.

Next, the insurer creates a rate to charge you per mile, which also varies by the driver. Metromile, for example, says its rates start at $29 per month for the base coverage plus “a few cents for each mile you drive.”

Companies track mileage either through a device that plugs in to the dashboard or through a photo app you use to snap a picture of your odometer. You are then sent a monthly bill, or, as is the case with Allstate’s Milewise, your bill is deducted from your account within hours of each trip.

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

According to data gathered for Insurance.com by Quadrant Information Services, a low-mileage discount cuts the rates on a full-coverage policy by an average of $35 in most states where it is available.

The savings are more significant in California because of that state’s laws. Low-mileage plans, on the other hand, can potentially save you much more than that.

Metromile claims that the average customer driving 6,000 miles per year can realize savings of $741 annually over a traditional policy. Mile Auto says some customers can save as much as 40% off of standard auto insurance rates.

Be warned, however, that even the per-mile rates can change when your policy renews, based on factors that are tied to the broader insurance market and that are beyond your control.

At What Mileage Is Pay Per Mile Insurance Worth It?

Mile Auto advertises that its policies may be suitable for qualified drivers who log fewer than 10,000 miles per year. Nationwide SmartMiles says the drivers who typically benefit are those who log fewer than 8,000 miles per year. Nationwide SmartMiles also offers up to a 10% discount for safe driving after the first renewal.

A ValuePenguin analysis found that the typical driver who chose Metromile was between 21 and 40 years old, lived in areas with access to public transit, and drove an average of 500 miles per month, or 6,000 miles per year.

Take note, too, that the occasional long trip may not ding your bill too severely. That’s because some companies often stop counting for the day after a certain number of miles — 250 miles a day (except for New Jersey, where it’s 150 miles a day) at Metromile and Nationwide SmartMiles, for example.

Who Should Consider Pay Per Mile Car Insurance?

Anyone can apply for pay per mile auto insurance if it is available in your area. Each company will use its own rating factors to determine whether you qualify for this low-cost option.

But just because you can apply for pay per mile auto insurance, that doesn’t mean you should. Many people should steer clear from pay per mile car insurance.

The people who should consider pay per mile car insurance are people who don’t drive their car much or drive very short distances.

If you’ve already read the other sections, you’ve probably figured this out already, but you may have missed this if you’ve skipped around (yeah, we know you do that).

We’re all different when it comes to our driving habits, and what you might think is a little driving, an insurer might feel is kind of a lot, but a good rule of thumb is that you’re a good candidate for Pay per mile insurance if:

You’re retired, you basically drive your car to the store once or twice a week and rarely leave town. If that’s you, you could argue that Pay per mile insurance was made for you.
You aren’t retired, but you have a short commute, and, again, you don’t drive around often. Road trips aren’t in your vocabulary.
You live in the city. You make the occasional road trip – in fact, that’s a big reason why you have your car so that you can get away every once in a while. Mostly, your vehicle is in a parking garage, and you’re often using public transit to get around.
You’re in college, and your car is sitting at your parents’ home most of the year. (But before you drop your policy and get a Pay per mile policy, mention this to your insurer. Most insurance companies will give you a discount if your car isn’t going to be driven much because you’re off at college.)
You work from home – and along with not having a commute, you simply don’t drive much.
You have a second vehicle that you take out every once in a while but don’t drive all that much.

If you have car insurance and feel like you pay a fortune, and it’s unfair because you don’t drive all that much, then you should consider getting pay per mile car insurance.

Companies That Offer Pay Per Mile Insurance

Many companies offer discounts for not driving far – these four companies, however, offer actual Pay per mile car insurance.

The companies, and the states they currently operate in, are listed below. If your state isn’t listed, you still may want to check with the company; these things are constantly changing.

Metromile

You can find them in eight states so far: Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington.

While it’s hard to say what you’ll save, one excellent selling point is that Metromile will give you a 250-mile mileage cap (150 miles if you live in New Jersey), so if you decide to make an occasional road trip, where you travel 500 miles in a day, you’ll only pay for 250 miles.

Mile Auto

Mile Auto is available in Arizona, Oregon, Illinois and Georgia.

How much will you save over conventional service? Mile Auto believes you’ll save 30 to 40 percent.

Nationwide SmartMiles

SmartMiles is now offered in Washington, D.C., and 40 states. While it might be easier to say what states you can’t find it in, here’s a list of abbreviations of where you will find it: AR, AZ, CO, CT, DC, FL, GA, IA, ID, IL, IN, KS, KY, MD, ME, MI, MN, MO, MS, MT, ND, NE, NH, NM, NV, OH, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY.

How much will you save over regular insurance? It’s difficult to say, but Nationwide thinks you’ll save, on average, 25%.

Milewise From Allstate

Milewise from Allstate is available in 16 states and the nation’s capital: Washington, Oregon, Idaho, Arizona, Texas, Florida, Illinois, Indiana, Ohio, West Virginia, Virginia, Pennsylvania, New Jersey, Delaware, Washington, D.C., and Massachusetts.

How much will you save? Well, Milewise from Allstate reportedly costs, on average, $20 a month. So if you spend quite a bit more on car insurance every month, there’s your answer.

Does Pay Per Mile Insurance Offer Additional Bonus Coverage?

Additional benefits may be included or offered as an optional add-on to auto insurance based on mileage, depending on the company. Metromile, for example, automatically includes $1,000 of pet injury protection with its collision and comprehensive policies in all its states except Illinois and Virginia, and roadside assistance can be added.

Do I Need To Buy New Technology To Use Pay Per Mile Insurance?

You will not need to buy any special technology to use mileage-based car insurance. Companies that use a dashboard device will provide you with the device, which plugs into your car’s onboard diagnostics port (OBD-II).

These ports became standard in automobiles in 1996, so unless your car is more than 24 years old, it should have an OBD-II port. Some of these devices can be paired with a smartphone, if you choose, to monitor things like your driving behavior or your check-engine lights.

If you use Mile Auto, the company has you use your smartphone to take a photo of your odometer each month.

Pay Per Mile Car Insurance Tips

If you want pay-per-mile car insurance tips, the best tip is to understand the pros and cons of how this all works. If you know the pros and cons and feel like this type of insurance is a good deal for you, then it probably is. If you have to do a lot of math and think, “Well, I could drive less,” then you probably shouldn’t risk it.

But in a nutshell, the pros and cons are pretty straightforward.

Pros

Pay per mile car insurance is cheap. If you don’t drive much and have low mileage, you’ll pay less for your insurance premiums.
Pay per mile auto insurance offers more flexibility for drivers than traditional policies do.
You can save hundreds of dollars a year with pay per mile car insurance.
It is a car insurance for low mileage drivers that helps you save on your insurance premiums if you have any moving violations or at-fault claims.

Cons

It is possible that you are unable to find pay per mile insurance or pay per use car insurance because each state has its own car insurance requirements.
Pay per mile insurance is only for people who drive less than 10,000 miles a year. It’s not cost effective beyond that, and you can get the same coverage with traditional auto insurance policies.
Only a few companies offer pay per mile insurance, so it will be difficult for you to comparison shop.

Telematics Car Insurance

Telematics car insurance is a policy in which the driver’s driving habits are monitored by an in-car tracking device. The in-car tracking devices monitor your driving habits and tendencies, which helps determine how much you pay per month or year.

You can easily access real time data relevant to your rate with an easy mobile app on the go. It also alerts if there’s something wrong with the vehicle at any given point in time saving both money and hassle down the line.

How Does Pay Per Mile Car Insurance Differ From Telematics Insurance?

Pay per mile and telematics are two different types of insurance, each with their own pros and cons. Pay per mile is an insurance by the mile only concerned about the distance you drive while telematics may consider your driving habits to determine what risk you present to the insurance company.

The Bottom Line On Pay Per Mile Car Insurance

If you want Pay per mile car insurance, or low mileage car insurance, or pay-as-you-go car insurance, or whatever term you prefer, the main issue is that you should be somebody who isn’t somebody goes for long and meandering drives or has a lengthy commute. If you don’t drive a lot, car insurance for low mileage drivers can save you a lot.

Updated: 1-18-2022

Higher Premiums Send More US Drivers Out Shopping For Usage-Based Coverage

Stung by higher auto insurance premiums, US drivers are increasingly shopping for usage-based coverage and consenting to having their driving monitored, per the J.D. Power Quarterly Loyalty Indicators and Shopping Trends Report for Q4 2021 on US auto insurance.

Pay-By-The-Mile Insurance

Key Findings:

* More Us Consumers Are Switching Insurers Because Their Premiums Increased Despite Driving Less.

* They Want To Lower Their Rates Through Personalized Auto Risk Programs.

* In 2021, Higher-Risk Consumers Were More Likely To Actively Shop Around For Auto Insurance Than Their Lower-Risk Counterparts—That Wasn’t The Case During 2020.

What’s the context? Traditional, time-based insurance contracts often price quotes based on non-driving factors like your credit score and where you live.

Lockdown measures during the pandemic led consumers to drive less, laying bare the inflexibility of traditional coverage that doesn’t typically adapt its premiums to changing habits.

This pushed more policyholders to demand behavior-based pricing. It can offer lower premiums by analyzing auto usage and behavioral data to personalize mileage-based policies.

The data comes from mileage reporting and telematic driver scoring from real-time tracking through mobile apps, diagnostic port plug-in devices, Bluetooth beacons, or built-in options like OnStar.

Large US insurers like Allstate use telematics data to introduce mechanisms for structured behavioral change—such as earning cash back on each trip—to reward and promote less risky behavior.

Behind The Numbers:

* Telematics adoption grew in 2021: 49% of consumers opted into a telematics program when it was offered, according to a survey from TransUnion, which partnered with J.D. Power on the report.

* Sixty-nine percent of insurance customers in select global markets are now willing to share driving data with insurers if it means lower prices, compared with 50% in 2019.

* We forecast that 52.5 million US drivers will buy UBI coverage by 2023, up from 37 million this year.

What This Means: J.D. Power found that both price-conscious and quality-conscious customers are aware of and switching to personalized value programs. Telematics is well on its way to becoming a norm in US auto insurance.

That will likely increase the competitive pressure on midsize insurers—which have engaged with telematics at roughly one-third the rate of their larger counterparts, per Digital Insurance.

Insurers may see premium revenues decrease due to policyholders’ telematics and IoT usage. Those whose tech stacks are still works in progress may have a harder time compensating with the value-added telematics features that McKinsey recommends exploring, such as anti-fraud initiatives, assistance and service add-ons, and selling data to third parties.

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