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Pay Per Mile Car Insurance

Take a moment to think about how far you drive your car daily. What does your odometer say at the beginning of the day and then at the end? The national average daily mileage for a driver is around 30 miles. If you regularly see this as an average, then you’re in good shape insurance-wise. But, if you find yourself not being a frequent driver, then you may be spending more than you should by keeping your car insured.

If you’re a frequent driver, you can stop reading here. Auto insurance can cost a lot on a monthly or annual basis. If you’re driving your car under 30 miles a day or 8,000 miles a year, there’s a policy that can save you hundreds if not thousands when it comes to keeping your car insured. That wonderful policy is pay-per-mile insurance. Pay-per-mile coverage insures you just as much as your personal insurance would, except the amount you pay is partially based on how many miles you drive. That’s why it works better for drivers who don’t drive a lot since the less you drive, the lower your rates will be.

There’s a fact of life, the less you are behind the wheel, the less likely you’ll get into a car accident. This reduced risk contributes to the lower premiums so that it wouldn’t be as expensive as regular coverage. Pay-per-mile car insurance can also be referred to as low-mileage car insurance or pay-as-you-go car insurance. Here’s what you need to know about pay-per-mile insurance and whether or not you qualify as a low-mileage driver.

How exactly does pay per mile car insurance work?

As previously mentioned, pay-per-mile insurance includes all the coverage a personal auto policy would –collision, comprehensive, and uninsured motorist. Roadside assistance and liability coverage is also included. While your auto coverage remains unchanged, how you’ll be paying for it is drastically different. Typically, pay-per-mile insurance requires a daily or monthly rate based on common car factors such as make, model, driver’s age, driving record, and perhaps credit score. –This is what’s known as the base rate.

In addition to the base rate, there are the actual per-mile payments. To give you an idea of how much a mile can cost, an average policyholder pays under a dollar for each mile they travel every day. This payment is made monthly, with each bill covering the previous month. As you would expect, the amount you pay is dependant on how much you drive. We’ll get into a couple of examples of what the numbers may look like since there is no average. Pay-per-mile rates and premiums vary from customer to customer.

When would I get the most out of a pay per mile policy?

Look at your odometer and not your watch. It’s not the amount of time you’re in your car for, but the number of miles you drive. You can sit in traffic for an hour and a half, but the distance you’re traveling isn’t changing. Keep in mind, pay-per-mile isn’t for the average driver.
Here’s a list of those who would best save with pay-per-mile:

  • Public transportation – Vehicle owners who often take public transportation to work or on errands would save more with a pay-per-mile policy.
  • Work from home – Remote work has become commonplace, and personal vehicles remain in their driveways. When they are being driven, pay-per-mile would be the best option.
  • Certain car leases – Some leasing companies have mileage restrictions with their rentals. The mileage limits may go hand in hand with pay-per-mile.
  • College students – College campuses are tightly knit together. Students may bring their cars, but they may end up not using them as much. Walking to class may be the quicker option. Pay-per-mile would be ideal.
  • Older drivers or retirees – Older age groups don’t often drive. Retirees with no work to commute to may only drive on the weekends. Since the car may still be in their name, they could cover it more economically with pay-per-mile.

Where is pay per mile coverage available?

As an important side note, a drawback to pay-per-mile coverage is that it isn’t available in some states. The states which do include it have large metropolitan areas. If you live in a city, then you may use public transportation or walk most places.

If you checked with an insurer in your state and find out that pay-per-mile isn’t offered, then there may be some low-mileage discounts that could be applied to your personal auto policy. Pay-per-mile is not the same as usage-based auto insurance.

How does pay per mile insurance measure miles?

When on a pay-per-mile plan, your insurance company needs to constantly be in the loop of what your odometer reads at the end of every day or month. A lot of insurers install a device on the policyholder’s car that tracks their mileage and use. It can help keep a company in the loop about your safe driving habits, leading to discounts. Some devices track location, but that can be disabled.

Here at Insurance Navy, we don’t use a device or any telematics system for our pay-per-mile drivers. Instead, we require policyholders to take a picture of their odometer and submit them monthly. This is also a pretty common insurance practice, and it’s great if you don’t want to buy or have additional technology in your car. Again, you want to keep your insurer in the loop about your mileage constantly.

How much does pay per mile cost?

Because of the reduced risk of a driver not on the road frequently, pay-per-mile insurance is far cheaper than a full personal policy. As previously mentioned, there are two charges that add up to your monthly premiums –the base rate and the per-mile rate.
A formula to remember for calculating your costs is:

  • Base rate + (per-mile rate * miles traveled that month) = total monthly cost

Let’s say that your monthly base rate is $28. Your per-mile rate is generally below a dollar amount– only a couple of cents, truthfully. So, assume it’s 5 cents. In that month, you drive a total of 250 miles. If you plug in those values in the formula above, it adds up to a monthly cost of $40.50. That would be an annual cost of $486 –far less than the average of $1,200 it costs to keep your car fully insured. Additional insurance like roadside assistance can be added as an option.

What are the factors that determine my base and per mile rates?

Your base amount will always be lower than a personal auto policy. Some rates have been reported to be as low as $24 and as high as $30 monthly. Insurers use a wide range of factors depending on the driver and their car.
Here’s what matters when it comes to your insurance rate:

  • State of residence – Insurance rates vary from state to state. Most states put a limit on 250 or 150 miles depending on where you live. Meaning if for one month you were to go over 250 miles, you won’t have to pay for it.
  • Car make and model – Insurance companies typically assign higher premiums for larger or luxury vehicles. If you don’t drive often, it helps make sure that the car isn’t the latest make or model.
  • Safety features – If your car is equipped with certain safety features, you may be eligible for a reduction in premiums. They are basic features for a car like anti-lock brakes, airbags, and daytime lights.
  • Credit history – A good credit score or history shows a degree of financial responsibility, which is imperative for a policyholder to have. The insurer may even give you reduced rates as a result.
  • Age – Retirees will often opt for pay-per-mile insurance since they don’t drive as much. Older drivers generally get lower rates since younger drivers pay the most on average for their auto insurance. A young driver would start to see a reduction in rates when they turn 20.

What are some additional ways I could save on my pay per mile car insurance?

Outside of your insurance, there are several methods that you can use to reduce your per-mile charges. It goes without saying that being a safe driver will lower your premiums. But being a smart driver lowers per-mile premiums.
Become a smart and efficient driver by:

  • Using the most direct route – Prioritize minimizing your mileage by taking the quickest route or shortcut(s) to all your destinations. The fewer the miles, the cheaper the rates.
  • Completing errands in one run – When you need to run to the grocery store, bank, or Target, try completing all your errands for the day in one run. Multiple runs may increase your mileage.
  • Working close to or at home – Drivers that save the most on pay-per-mile coverage are those who work close to where they live –around five miles. Working from home has become relatively normal in current times as well.
  • Carpooling and public transportation – Public transportation was mentioned before as it adds no miles to your car. Carpooling with friends or coworkers is an alternative to save your car’s mileage.
  • Continue being a safe driver – Safe driving can always save you — financially and physically. Insurance companies continue to monitor their policyholders’ driving habits by the day. Continuing the practice of being a safe driver may cause insurers to take notice and offer a reduction in your rates.

What are the pros and cons of pay per mile coverage?

Now that we’ve covered what pay-per-mile insurance covers, costs, and how it functions –let’s truly compare the pros and cons of paying your car insurance by the mile. The massive difference in price between per mile and personal insurance is obvious with the numbers we’ve discussed. That is if only you are a low mileage driver. A rule of thumb is if your yearly mileage is greater than 10,000, then pay-per-mile wouldn’t be worth it. Also, consider the 250-mile cap for a day as a benefit.

At the same time, you may not be a low mileage driver. Spend the next week studying and keeping track of your mileage and driving habits. Even though 10,000 miles is the point where it would cost you more, even 3,000 to 9,000 miles is a bit much. It helps if you drive a maximum of 2,500 miles annually. You’ll also have to check to see if it’s available in your state. Be aware, pay-per-mile insurance can be a temporary policy. If you were to get a new job further away or drive more, it might be time to invest in a full policy.

With Insurance Navy, being able to monitor your mileage without the use of tracking technology is appealing for some customers. It’s not uncommon for customers to oppose a monitoring device being installed in their car. Taking a picture of your odometer at the end of every month is less personal and just as effective. People can’t tamper with their odometers without any notice. More well-known pay-per-mile services like Metromile may require this.

Is pay per mile right for me?

Based on everything you now know about pay-per-mile insurance, you may have concluded that it’s the best move for you if you are a low mileage driver. Whenever you’re shopping for new insurance, weigh your options. Receive quotes from a couple of insurance companies to get an idea of where you lay on per-mile rates. Remember to also keep an eye on what your personal policy includes and make sure that it’s in the pay-per-mile plan.

At Insurance Navy, we work with Mile Auto. That’s who the policyholders send their monthly odometer pictures to. Here, we pride ourselves on safe driving, customer privacy, and finding the most economical option for occasional drivers. Contact an agent today to find out more.