Understanding Pay-Per-Mile Insurance: A Smart Choice for Low-Mileage Drivers

November 23, 2023

According to Bankrate, the average American spends $1,771 annually on auto insurance, or 2.57% of their yearly income, which may seem unreasonably expensive for those who drive infrequently.

In such cases, opting for pay-per-mile insurance is a prudent choice, allowing you to pay exclusively for the miles covered.

Read on to learn more about pay-as-you-go car insurance and whether it fits your driving habits.

Discover the Benefits of Pay-Per-Mile Insurance for Safe and Infrequent Drivers

Having good coverage is the key to peace of mind and confidence on the road.

When you choose pay-as-you-go car insurance, you gain the following benefits:

  • Reduced insurance costs: Traditional policies come with a fixed monthly premium, regardless of your mileage. Car insurance pay-as-you-go, on the other hand, allows you to pay only for the number of miles you’ve driven. This means you won’t pay for your car’s downtime, leading to significant savings.
  • Customizable coverage: Pay-as-you-go insurance for a car typically enables policyholders to add or remove additional options. Thanks to this flexibility, you can adjust your policy’s terms based on your evolving life circumstances and financial capacity.
  • Monitoring: Pay-as-you-go car insurance often involves using a device or mobile app to track your driving style and mileage. This not only lets you review your driving history but also helps you keep an eye on the number of miles driven.

Furthermore, insurance by the mile encourages drivers to use their vehicles less frequently, reducing wear and tear and cutting down on fuel expenses.

Exploring the Basics of Pay-Per-Mile Car Insurance

So what is pay-as-you-go car insurance? This is a policy that pays for actual mileage, with several attractive features:

  • The policy involves a monthly base rate, typically averaging around $30 per month.
  • If you don’t use your car at all during a month, you only pay the base rate.
  • You usually pay 2-4 cents per mile. For example, driving 400 miles at 4 cents per mile will cost you $16 plus the base rate.
  • To avoid large bills for trips, there is a daily mileage limit. You won’t need to pay for miles driven beyond the established limit, which is typically around 250 miles per day.

Pay-as-you-go monthly car insurance is perfect for vehicle owners seeking an affordable policy and who don’t frequently get behind the wheel.

Comparing Pay-Per-Mile Insurance to Traditional Auto Coverage

In order for you to compare pay-as-you-go car insurance, we suggest taking a look at the table:

 Pay-per-mile car insurance reviewsTraditional insurance reviews
PricingFixed base rate + payment per mileFixed annual/monthly payment
Price influencing factorsMileageDriver’s age, driving experience, car condition, model, registration location, etc.
Tracking systemA device or mobile app can be used to track mileage and driving styleNot provided
Policy customizationOption to customize the insurance policy with additional featuresLimited options for customizing the insurance policy with additional features
Policy termMonth, half-year, year. Some insurance companies offer automatic policy renewal until you opt outMonth, half-year, year. Some pay-as-you-go car insurance companies offer automatic policy renewal until you opt out
Safe driving discounts and bonusesAvailable and based on actual driving habitsMay be limited
Updates and changesNo need to review the policy to make updates or change the coverage levelChanges may require a policy review

Choosing the right policy depends on your individual circumstances and needs, so make sure to research how pay-per-mile insurance works and what terms and conditions it offers before taking out a policy.

Uncovering the Inner Workings of Pay-Per-Mile Car Insurance

Compared to a standard car insurance policy, pay-as-you-go car insurance can be more affordable if your mileage is lower than the U.S. average, which is  13,476 miles per year, according to the U.S. Department of Transportation.

Here’s why pay-per-mile insurance is the best insurance for cars not driven often:

The essence of this type of insurance includes the following aspects:

  • Individual rates based on actual mileage
  • The ability to control insurance expenses by reducing the number of miles driven
  • Effortless mileage and driving style tracking

Likewise, insurance car pay-as-you-go is based on specific driving data, allowing for a more accurate risk assessment.

How Your Mileage is Tracked and Used to Determine Rates with Pay-Per-Mile Insurance

As advantageous as insurance for a car you don’t drive might seem to be, it requires access to your car for measuring mileage and driving habits. This information is necessary to determine your insurance premium.

Mileage tracking can be done using the following devices:

  • OBD-II port: Some insurers provide a small tracking device that plugs into your car’s OBD-II port. It collects your mileage, speed, and other information to analyze your driving habits.
  • Mobile apps: Many insurance providers offer mobile apps. They track your location and driving behavior in real-time using your phone’s GPS.
  • Telematics: Some insurers offer special telematics devices that are installed in your car to gather statistics about your driving and condition.

Some insurance companies do not provide any tracking devices. If so, you need to calculate the mileage yourself and report it to your insurer.

Personalizing Your Pay-Per-Mile Policy: Tailoring Coverage to Fit Your Driving Habits

Buying a car is a big step, but equally important is choosing the best pay-as-you-go car insurance.

To get the best deal on car insurance for cars not driven often and get the best coverage, stick to the following recommendations:

  • Determine your needs. Ask yourself how often you use your car, what roads and routes you drive on, and how much you can afford to spend on insurance.
  • Research the market. Research the available pay by the mile offerings from several insurers while paying attention to reputation and pay-per-mile insurance reviews.
  • Clarify the details. Check with your agent about all the details you are interested in. Make sure you understand the terms of the insurance, including possible penalties and additional options.
  • Study the contract carefully. The contract usually specifies all the terms and conditions to which the insurance company agrees to indemnify if the covered event takes place. Before signing the documents, pay attention to the balance between the insurance indemnity amount and the value of your car, the risks the policy covers, etc.

The right choice of the best pay-per-mile insurance can save you a lot of money and save you from many problems on the road.

How much is pay-as-you-go car insurance?

Here are the factors considered when calculating the pay-as-you-go car insurance base rate:

  • The state: States with high levels of traffic congestion, accidents, or car theft will have higher rates. Therefore, New Jersey, Florida, Texas, California, Georgia, and Oregon will have different costs.
  • Make and model: Owners of premium and sports cars will have to pay more for pay-as-you-go car insurance because these cars are more expensive to repair.
  • Driver’s age and experience: The cost of pay-as-you-go car insurance for young drivers will be much higher due to the lack of driving experience and the high risk of accidents. According to the World Health Organization, injuries from traffic accidents are the leading cause of death for young people under the age of 29.
  • Driving history: If you have never been in an accident or broken the rules, the cost of the policy will be much lower.
  • Additional options: The choice of additional insurance options, such as protection against accidents and natural disasters, affects the final cost of insurance.

Taking Long Trips? Here’s What to Expect from Your Pay-Per-Mile Premium

If you’re a mileage insurance policy holder and you’re going on a long car trip, it’s important to know the nuances that can arise:

  • Billing period: If your trip takes a few weeks during the billing period, you’ll be credited for the extra miles you’ve driven during that time.
  • Mileage tracking: Your insurance company will continue to track your mileage during long trips, so make sure your tracking device or mobile app is active and counting extra miles.
  • Extra expenses: Long trips tend to increase the cost of insurance. Even so, mileage-based insurance remains favorable compared to traditional coverage.

Once your trip is over, the value of your monthly mileage and insurance premium calculation will revert to your normal daily routine.

Is Pay-Per-Mile Car Insurance the Right Choice for You?

Pay-as-you-drive insurance can be a better option than a traditional policy, especially if you’re short on time and don’t drive regularly.

Pay-as-you-drive insurance is suitable for the following:

  • Drivers who have a second vehicle
  • Students and novice drivers
  • Drivers with accident-free driving experience

Before deciding to take out this policy, carefully assess your circumstances and compare offers from different insurance companies.

Don’t Pay for Miles You Haven’t Driven

Insurance has become more affordable thanks to mile auto payment. Now, every driver has the opportunity to avoid spending a lot of money on coverage and only pay for the miles they actually drive.

How does it work? You are provided with a tracking device to collect data on your trips that records your mileage. Ultimately, your insurance premium is calculated based on the miles you drive.

This approach gives drivers the ability to control their auto insurance costs and save money. By signing up for pay-as-you-go car insurance monthly, you can rest assured that your rate fairly reflects your actual activity on the road.

Understanding Pay-Per-Mile Insurance: A Smart Choice for Low-Mileage Drivers 1

Oleksandr Rohovnin is a Content Marketer at Phonexa.com and an expert contributor to CoverExplore. His passion is digital marketing, innovative technologies, tech industries, and – above all – distilling vast amounts of complex information into engrossing narratives anyone can relate to. At CoverExplore, Oleksandr stokes passion for auto insurance and the automotive industry in general in every story he curates.

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