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Understanding Pay-Per-Mile Insurance

What Is Pay-Per-Mile Insurance?

Pay-per-mile auto insurance is a type of policy where your coverage costs are primarily based on the number of miles you drive. The total cost is calculated by multiplying the number of miles driven by a per-mile rate, which is then added to a base rate.

The base rate is typically charged monthly and remains constant during the policy period. This rate is influenced by factors such as your age and driving history. The per-mile rate is added to the base rate to determine your total monthly payment.

Pros of Pay-Per-Mile Insurance

Lower Costs

If you don’t drive many miles, you could save money with pay-per-mile insurance. This is ideal for people who work from home, retirees, students living near campus, and those who use public transportation or rideshare services frequently.

For example, Mile Auto claims that drivers can save 30% to 40% compared to traditional insurance rates if they drive up to 10,000 miles a year.

Full Coverage

Pay-per-mile insurance generally offers the same types of coverage as traditional policies, including liability, comprehensive, collision, rental car reimbursement, and roadside assistance.

Mileage Caps

Some insurers cap the number of miles you can drive each day. If you exceed this cap, you may only be charged for the first set number of miles, such as 250 miles per day. However, consistently exceeding the cap could result in higher costs.

Cons of Pay-Per-Mile Insurance

Limited Availability

Not all insurers offer pay-per-mile insurance, and it may not be available in every state. For instance, Nationwide’s SmartMiles coverage is not available in Alaska, Hawaii, Louisiana, North Carolina, New York, and Oklahoma.

Additionally, some insurers, like Progressive, do not offer pay-per-mile insurance at all. Coverage may also be limited to newer vehicles, typically those manufactured after 1996.

Upfront Payment

Some insurers may require you to preload money into an account, from which funds are deducted based on your mileage and base rate. This could mean paying more upfront compared to regular auto insurance premiums.

Privacy Concerns

Pay-per-mile insurance often involves tracking your mileage through a device placed under your dashboard or a mobile app. This data is sent to your insurance company, which may raise privacy concerns for some drivers. Alternatively, you may need to regularly submit a photo of your odometer reading.

Conclusion

When considering pay-per-mile auto insurance, it’s important to weigh the pros and cons. While it can offer significant savings for low-mileage drivers, it may not be available in all areas or from all insurers. If you’re ready to explore your car insurance options, consider using a comparison tool to find the best rates.

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