For years, people who don’t drive much may have felt they weren't getting cheap car insurance. Now pay-per-mile car insurance is growing. This form of car insurance allows its customers to pay based on the number of miles they drive. Customers are already saving hundreds of dollars on pay-per-mile policies.

Do you think you fit the bill? Pay-per-mile insurance can save you a lot of cash, but if you aren’t careful, it can cost you more than you expected. If you feel that your car hasn’t been getting many miles for the last few months, you might consider a pay-per-mile policy.

What Is It?

Pay-per-mile car insurance allows customers to pay based on how much they drive. Some insurers that offer this plan believe that the amount someone drives is a determining factor in how likely he or she is to make a claim. In other words, the more you drive, the greater risk you have.

How Does It Work?

In order to accurately get charged for the amount of miles you’re driving, your insurance company will install a wireless device into your car. Not only does this piece of technology measure how many miles you’re driving, it can also measure how safely you’re driving.

What Companies Offer It?

Metromile is leading the charge in the pay-per-mile car insurance. Drivers pay a low monthly base rate in addition to a few cents per mile they drive. The bill at the end of each month is the sum of the base rate and the per-mile rate a customer drives. With Metromile, drivers with a low monthly mileage save an average of $500 annually. This policy is currently only available in California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia and Washington, but Metromile plans on expanding. 

Esurance offers a pay-per-mile plan for its customers in Oregon. Esurance sends its pay-per-mile customers a device that monitors their mileage. Esurance’s monthly costs are similar to those of Metromile, with a base cost and a per-mile rate. Esurance only recommends buying this policy if you drive less than 10,000 miles annually; otherwise, you probably won’t see a difference in your rate.

Who Is the Ideal Pay-Per-Mile Insurance Customer?

The customers who get the best rates with a pay-per-mile policy are the ones that don’t drive much. If your car is parked more often than the average car, you will save quite a bit of money with this policy.

  • Drivers with a short commute: Since every mile only costs a few cents, people who aren’t travelling very far on a daily basis will make out well with this policy. For customers that only drive a few miles down the road to get to work, this deal can be worth it.

  • Fair-weather drivers: The national average annual miles per driver is 13,476 miles, according to the Federal Highway Administration. If you feel you drive far less than this amount, you might want to switch to pay-per-mile car insurance.

  • People who rely heavily on public transportation: If you take the bus or train on a day-to-day basis, you’re probably not driving too much. If you live in an urban area and don't use your car much, pay-per-mile insurance might save you money.

Evaluating pay-per-mile insurance

Don’t underestimate the number of miles you drive every year. Track the amount of miles you drive in a month-long period of time. While pay-per-mile insurers don't track how well you drive, you can find out if you're good driver with a free driving app like EverDrive. 

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