There will be over 6 million passenger car accidents in the US in 2019.
Some are fatal, some are severe, while some are minor.
But what’s common in all of these accidents is they are costly.
A single, minor fender-bender can cost you hundreds of dollars.
So having auto insurance is not only mandatory in almost every state but also important to save you from spending hundreds or even thousands of dollars.
While auto insurance is necessary, there is no doubt that these policies are also expensive.
There are ways you can bring down the cost of insurance policies and premiums, have you ever felt like you are paying for something that’s not worth it?
This article is going to describe in detail everything you need to know about pay-per-mile car insurance; what it is, how it works, which companies offer it, and most importantly, is it worth it?
Contents
How General Insurance Policies Prices are Decided
Auto insurance companies charge different prices to different people for the same auto insurance policy.
The price is decided based on multiple factors that influence the risk of a person making an insurance claim.
Some of the common factors include your driving record, previous insurance claims, type of vehicle, age, gender, traffic violation, and much more.
All these factors either increase or decrease the cost of the insurance policy.
A person who is more likely to be in an accident and make a claim will have to pay more for the insurance policy.
All the risk factors are taken into consideration while deciding the price.
But one factor, which is perhaps one of the most important factors, is not considered here; How often are you going to drive the car? This is where pay-per-mile insurance policies come in.
What is Pay-Per-Mile Car Insurance
Every other factor does contribute to the risk of getting in an accident and making an insurance claim, but why should you pay the same amount or even more for the same auto insurance policy than someone who drives way more than you?
What if you hardly drive your car over 100 miles while the other person drives over a thousand miles in a month?
It is a no-brainer that if someone drives more, the chances of getting in an accident also increase.
This is the main factor that’s considered in a pay-per-mile insurance policy while calculating the price.
As the name suggests, pay-per-mile auto insurance charges you based on your monthly mileage.
The more you drive, the more you pay.
Other factors are considered here as well while calculating the cost.
Pay-per-mile car insurance can save you a lot, and by a lot we mean almost 50% of what you are paying for a general car insurance policy.
How Does Pay-Per-Mile Car Insurance Work?
When you buy a pay-per-mile insurance policy, the insurance company will get your details, look at your driving records and other factors, and then give you three or four options to record and access your car’s “telematics”.
This is the information that the company needs to calculate the cost of your insurance policy.
While it depends on the company, usually the data that’s collected from the policyholders includes:
- Odometer data to check how much the car has been driven
- Braking frequency and intensity
- Other data that shows the risk of getting in an accident
No insurance company accesses the location data of the policyholder.
But it is important to ask your insurance company about their data collection policy for your privacy concerns.
The data can be collected using a device that plugs in your OBD II port.
But this has become outdated and now is being replaced by apps and software that integrates with your car’s software or your phone and it can access and collect relevant data over Bluetooth.
Some companies even allow you to send a picture of your odometer if there’s no option for an OBD device or mobile application.
With the data collected, your insurance rates will be calculated at the end of the month.
The rate-per-mile fluctuates depending on multiple factors.
There’s usually a base rate that you have to pay, and then the rate is calculated by multiplying the number of miles you’ve driven by the per-mile charge.
Who Should Get It?
Apart from people who want to save some money on auto insurance charges, people who do not drive too much.
Pay-per-mile car insurance will usually get you the lowest rates for minimum coverage in the state.
So if you are a student, someone who prefers taking the public transport often, or someone who works from home and rarely sits behind the wheel or just has a second car that rarely smells the asphalt, you can go for pay-per-mile car insurance.
Pay-per-mile car insurance ensures that you pay only for how much you drive, not more than that.
It can help you cut hundreds of dollars from your auto insurance expenses.
But there is a big condition.
Is it Worth it?
The big condition with pay-per-mile auto insurance is that it is only worth it when you rarely drive your car.
If you plan on driving a lot, then getting general insurance would be much better for you as pay-per-mile car insurance might get more expensive.
First, look at how much you drive in a month normally.
People drive more than they think.
After getting your monthly mileage, use the number to see what your average yearly mileage would be.
If it is under 8,000 miles, then getting pay-per-mile car insurance would be a good option.
If it exceeds the 8,000 miles mark, then you are better off with a general auto insurance policy.
