What are the top rated auto insurance companies
drivers who don’t get a ton of miles on their odometers have what’s known as a “good problem.” By driving fewer miles, you’re reducing wear and tear on your vehicle, saving money at the gas pump, and reducing your chances of a car accident.
Those are all good things. but you could still be paying for car insurance that doesn’t fully reward you for your minimal driving.
pay per mile insurance is specifically designed so you can control your monthly auto insurance bill based on how much you drive.
how pay per mile insurance works
“There is a direct relationship to how many miles people drive and how likely they are to be in an accident,” says rick chen, a spokesman for pay-per-mile insurance company metromile, which is expected to be acquired by lemonade in 2022. Even if you don’t drive much, others do. And that can affect the rate you pay, because an overall increase in accidents, repair costs, and/or injury bills will increase rates for everyone.
“Insurers have to cover these types of cases in their prices,” Chen says. “They cover it across their entire customer base.”
That said, insurers do offer discounts for low mileage, but the discount usually kicks in if your mileage falls below a single threshold, like 8,000 miles a year.
With pay-per-mile insurance, you get the same types of coverage you would with traditional auto insurance, says Teresa Scharn, associate vice president of personal lines product development at Nationwide Insurance. this includes liability insurance, collision and comprehensive coverage, uninsured motorist coverage and roadside assistance. but you get more control over the rate you pay because it’s based, in part, on the actual miles you drive.
Pay-per-mile insurance programs charge a daily or monthly base rate that is based on factors similar to those used when setting rates for a traditional insurance policy, such as your age, driving history, vehicle, location and credit. so the base rate will vary from person to person.
then there is a charge per mile. The rate per mile also varies from person to person depending on the factors used to establish the base rate, says Scharn. and the amount you pay will vary from month to month based on the number of miles you drive. the monthly bill is usually based on the number of miles driven in the previous month.
Discounts may also be available. For example, in California, Metromile has discounts for good drivers, mature drivers, insuring more than one car, and having a vehicle recovery device.
Here’s an example of what a pay-per-mile plan would look like: You pay a monthly base rate of $29 per month and a 5-cent mileage rate. if you drive 500 miles in a month, you would pay a total of $54 for that month ($29 base rate plus 500 miles x $0.05 = $54).
Pay-per-mile insurance should not be confused with usage-based auto insurance, which places an emphasis on safe driving behaviors, such as braking and accelerating, and less on actual miles traveled.
how miles are measured
For pay-per-mile programs to work, insurance companies must have an accurate way to measure your miles. most use a small device that plugs into a port near the steering wheel (called obd-ii). you may need to have a 1996 or newer vehicle for the device to work, depending on the insurer. and some devices, like those across the country, may be incompatible with hybrid vehicles.
chen says the metromile device tracks location in addition to mileage, but the location service can be turned off for privacy reasons. If you keep it on, you can use the Metromile app to track and plan trips, monitor your gas costs per trip, and locate your car if it’s stolen. metromile offers a feature in arizona and oregon that will monitor driving habits and allow safe drivers to get a lower fare.
If you don’t like the idea of installing a device in your car to track your mileage, another option is mile auto, which requires policyholders to take a picture of their odometer once a month to report mileage.
pay per mile insurance cost
Pay-per-mile insurance rates vary from company to company. and rates will vary from driver to driver, just as they would with traditional auto insurance.
For example, Scharn says the base rate for the national smartmiles program is about 30% of what the premium would be for a traditional national auto insurance policy. So if your annual premium for a traditional policy was $1,000, the base rate for smartmiles might be around $300 for you. the average fare per mile is 6.5 cents but can range from 2 cents to 10 cents, according to scharn.
bymile and mile auto from liberty mutual says customers save up to 40% on their standard insurance rates. metromile says its customers save an average of $741 a year. The website lists the base monthly rate as starting at $29, but Chen says Metromile has some customers who pay less than that. the average fare per mile is 5 cents to 7 cents, according to chen.
unlike other pay-per-mile insurance programs, allstate milewise charges a daily rate and a per-mile rate. you must link a credit or debit card to your account and costs are charged once the trip is complete.
Some of these programs have limits on the miles you pay per day. so if you go on a long road trip, you won’t get hit too much. for example, metromile and nationwide will not charge for more than 250 miles driven in one day, and liberty mutual will not charge for more than 150 miles driven in one day.
who benefits from pay per mile insurance?
Clearly, someone who doesn’t drive much could save money by switching to pay-per-mile insurance. but what constitutes “not much driving”?
On average, Americans drive 13,476 miles a year, according to the Federal Highway Administration. you’d have to drive less than that to save with pay-per-mile insurance, Chen says.
For example, if you were charged a base rate of $29 per month, a 5 cent mileage rate, and drove 500 miles per month, you would pay a total of $54 per month for pay-per-mile auto insurance. however, if you drive as much as the average American each month (1,123 miles), you’d pay about $85 per month.
When considering how much you drive, don’t mistakenly factor in how long your commute takes, especially if you spend time sitting in heavy traffic.
“It’s not about how much time you spend in your car. it’s the distance you drive,” Chen says. “For most people, they just don’t drive much.”
Car owners who don’t log a lot of miles can include:
- people who take public transport to work and drive only on weekends
- people who work from home and do not travel
- people with car rentals that have strict mileage restrictions
- college students living on campus
- retirees who rarely drive
A pay-per-mile insurance plan could also be attractive to drivers who want to save money based on actual mileage driven compared to plans that focus on driving behavior, such as performance-based car insurance. use.
try it before you buy it
If you’re not sure if pay-per-mile car insurance is right for you, keep track of your miles before committing to a plan. metromile recently introduced its ridealong app, which counts how many miles you drive for 17 days and then calculates what your rates and monthly bill would be if you were a metromile customer.
Another option is to download a third-party mileage tracking app on your smartphone and track your miles. There are free and paid apps that run in the background and track miles. this could be a good option for tracking miles if you don’t have consistent daily driving habits, like going to work or school.
how to get pay per mile insurance
allstate, metromile, mile auto and nationwide are some of the companies that offer pay per mile insurance. With all four, you can get online rate quotes and get a better idea of how much you’d pay for coverage based on miles driven.
Not all pay-per-mile plans may be available nationwide.
Before you switch to a pay-per-mile insurance policy, get quotes from companies that offer a program in your state. then check your current policy to see if you can get the same level of coverage (or more) with a pay-per-mile program at a lower cost.
drivers interested in mileage-based auto insurance see an opportunity to cut costs
Nearly two-thirds (64%) of respondents said they are interested in mileage-based auto insurance, according to a 2021 survey of telematics consumers by arity, a telematics and analytics provider founded by allstate. some drivers see this model as an opportunity to reduce premiums.
Among those surveyed, 41% already see themselves as a low-mileage driver and 39% see mileage-based auto insurance as a way to have more control over insurance pricing. Other reasons respondents said they are interested in mileage-based insurance include the ease of participating in a program, keeping track of miles driven, and having more transparency in car insurance pricing.
But not everyone is interested in mileage-based car insurance. Of those respondents who said they weren’t interested, 41% said they were satisfied with their current auto insurance. a third of those surveyed said they are not comfortable with tracking their driving data. Other respondents (28%) think mileage-based insurance would be too complicated, and 24% said they don’t expect to save enough money with a mileage-based auto insurance policy.