Should You Switch To Pay-Per-Mile Car Insurance?

The number of miles driven varies widely.  Some people may have a 50-mile commute each way whereas others may drive a few miles and use public transport.

The more miles you drive, the more likely you are to get into an accident.  So it makes sense that people who drive more pay more in auto insurance than someone who drives less.

Pay-per-mile insurance, as the name suggests, allows you to pay based on how much you drive.

How does pay-per-mile insurance work?

The auto insurance premium consists of two components – the base rate and the per-mile rate.

Your base rate is based on factors such as your age, gender, driving history, where you live, the type of vehicle you drive,  and your credit history.

The per-mile rate depends on how many miles you drive per year. But the per-mile rate contributes just a small part to your total premium.

Here is an example.  Let’s say that your base rate is $50 per month and your per-mile rate is $0.05  Let’s also assume that you drive 200 miles per month.  Your monthly premium will be $70 plus 200 miles times $0.05 for a total of $80 dollars.

Do you get the same coverage as traditional insurance?

Yes, with pay-per-mile insurance you will get the same coverage traditional auto insurance.

In addition, all the add-ons available from traditional insurance providers such as rental car reimbursement, roadside assistance, and no-deductible glass repair are available from pay-per-mile insurers.

Will pay-per-mile insurance save you money?

Pay-per-mile insurers advertise that you could save $500 per year.  In reality, your savings vary based on the number of miles you drive.  The more you drive, the more you will pay.

There are just too many variables to say that it will save money for everyone. But in general, if you drive infrequently you can save money.

Are there any disadvantages?

With traditional auto insurance, you pay a fixed premium for six months or a year.  With pay-per-mile, your auto insurance payment varies depending on how many miles you drive.  If you underestimate the miles you expect to drive, expect to pay more.  This makes budgeting for insurance payments very difficult.

Many pay-per-mile insurers charge you per mile for a maximum number of miles per day, usually 150 to 250 miles. So you can take an occasional long driving trip without worrying about the number of miles you drive.

For whom does pay-per-mile work best?

Pay-per-mile works well for people who drive less and fall into one of these groups:

  • You take public transportation to work and only rarely use your car except for long trips
  • You take a vanpool or carpool to work
  • You work from home
  • You own multiple cars but you drive one car only occasionally

Which insurers offer pay-per-mile auto insurance?

There are a number of companies that offer pay-per-mile insurance.  Here are a few that are well known.

Bottom Line

If you are an infrequent driver, pay-per-mile insurance can save you money.  But the downside is that your payment changes every month based on how many miles you drive. If your driving record is not very good or if you can’t estimate how many miles you expect to drive, stick with a traditional insurance policy.




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