Pay-per-mile auto insurance: Everything you need to know
If you consider yourself an infrequent driver, paying for high-cost auto insurance may feel pointless. However, there is a way that you can cut down on your auto insurance cost if your car spends most days in park: pay-per-mile insurance.
How does pay-per-mile insurance work?
Pay-per-mile (PPM) insurance is exactly what it sounds like: the cost of your car insurance is based on the number of miles that you spend out on the road. Instead of charging you based on a blanket insurance plan, these policies take the exact number of miles that you drive each month into account. Despite the fact that these PPM policies often end up being less pricey than flat-rate plans, your car will still receive comprehensive coverage against car accidents and other troubles on the road.
What makes PPM less costly than other plans? The idea is that those who have PPM plans spend less time on the road, and therefore, are less likely to end up getting into an accident that their insurance company will have to end up paying for. The lowered risk is what entices insurance companies to offer these cheaper plans to low-risk drivers. They charge mere pennies for each mile that the insured drives in a month, adding that expense onto a much cheaper flat rate. The initial rate takes factors like an individual’s age and driving record into account, though it can be as little as $20 a month.
Is pay-per-mile a good option for you?
If your car spends far more time in your garage or driveway than it does on the road, then you might want to consider PPM insurance. Individuals who work from home, those who are retired, or those who have a fairly short commute to essential locations will likely be able to save money on their insurance plans if they do PPM rather than a traditional plan. College students also often don’t leave their campuses enough to warrant a typical insurance plan. Additionally, if you depend on public transport to get around more than you do on your vehicle but still have a traditional insurance plan, then you are likely paying for more coverage than you need.
If you log under 12,000 miles each year (approximately 1,300 less than the average person’s yearly average), you may able to save hundreds of dollars by switching to pay-per-mile insurance. Since each mile is clocked in at only a handful of pennies, decreased driving habits can have a major impact on how much money you keep in your pockets. On PPM plans, 100 miles can cost under $4. Compared to traditional insurance plans with higher flat rates, this can be a fantastic option for you if you hardly commute, rarely use your vehicle, or keep your monthly mileage low. However, if you drive over 12,000 miles each year, a traditional plan will probably be your cheapest option.
Who offers pay-per-miles plans?
Unfortunately, PPM insurance isn’t available through many big-name insurance companies. A very limited number of companies currently offer PPM plans in comparison to those who only offer low-mileage discounts (money deducted from a plan at the end of the year for staying under a certain mileage). Most large insurance brands do not offer PPM. The companies that are hinged on these plans are mainly newer organizations that could potentially fail to address claims with the same accountability as nationally recognized companies.
Metromile is the most well-known company in the industry of PPM insurance thus far, with Allstate Milewise, Nationwide SmartMiles, and Mile Auto also having recognized plans. The majority of these PPM plans aren’t available in every state. Nationwide SmartMiles is the most widely available, being offered in 22 states (AZ, CO, CT, DC, IA, ID, IL, IN, MD, ME, NH, NM, NV, OH, OR, PA, TX, UT, VA, VT, WA, WY). Allstate Milewise is available in 13 (AZ, DE, ID, IL, IN, MD, NJ, OH, OR, TX, VA, WA, WV). Metromile is only available in 8 states (AZ, CA, IL, NJ, OR, PA, VA, WA). It’s least available from Mile Auto, offered in only three states (GA, IL, OR).
What else should you know about PPM?
Pay-per-mile may not be a clear-cut solution to saving money on insurance for every infrequent driver. However, it may be an even more attractive option for people with pre-determined risk factors. Another feature of PPM plans is that the baseline pricing is less influenced by factors like age and driving history. While these play heavily into the risk-based pricing of other insurance policies, they have a more passive role in the construction of PPM plans. As a result, younger and elderly drivers might be more drawn to the financial perks of this type of plan.
Lastly, if you’re wondering if PPM would be a good fit for your lifestyle, make sure you consider both your yearly mileage and your comfort with a shifting insurance rate. Be aware that your bill will change each month, and that a road trip or lengthy drive may significantly up the cost of one month’s bill. If you’re anticipating any changes that may affect your estimated savings with a PPM plan (i.e., moving to a different state or taking on a job in a new location), make sure you take them into account as you explore your options.