Pay Per Mile Insurance

A Guide to Pay Per Mile Insurance

Fixed or variable - that’s the question. In the restaurant world, it’s the difference between an all-you-can eat buffet (fixed price) and a la carte (variable pricing). Both types have their adherents. In the world of car insurance, fixed pricing refers to standard car insurance policies, while the variable role is taken up by pay per mile insurance. Both will cover many of the contingencies that arise when you own or drive a vehicle. The question is which one will provide you the coverage you need at a lower price. Let’s find out.
Do you know about Pay Per Mile Insurance? If you don’t drive very far but still need a car, it can be a real money-saver.

What's Pay Per Mile Insurance?

Pay per mile is usage-based vehicle insurance - your premium depends on the mileage you rack up every month. Note that it differs slightly from “pay how you drive” insurance which adjusts your premium depending on your driving habits (such as whether you regularly speed or stomp on the brakes). Several carriers now offer pay per mile insurance. It’s usually implemented with a wireless device that connects to a car’s OBD-II port, which can be found in all cars built after 1996.

The device communicates with the insurer to report the miles you drive. It might optionally report other information, such as location, but you might be able to defeat the extra functionality. The insurer calculates your month’s premium based on the miles you drive and the coverage options you’ve chosen. Below you can see major U.S. providers of pay per mile insurance.

Metromile

Metromile is a startup company funded by National General Insurance and several other investors. Its pay per mile app uses an OBD-II device that reports miles driven. It also comes with GPS tracking, but you can opt out if you’d rather not share that information. Billing is a combination of base and per-mile rates that depend on factors such as the vehicle type, driver age and history, credit score and length of prior insurance.

The per-mile rate varies from 2 to 11 cents, and the base rate starts at $29/month. You pay for each mile you drive up to the daily limit (250 in most states, 150 in New Jersey). Once you exceed the daily limit, the remaining miles are free. Metromile offers a multi-car discount that saves on both the base and per-mile rates. The first month’s payment consists of your base rate and any required prepayment. For subsequent months, you pay the base rate plus the per-mile rate for any miles driven in the previous month. Billing is automatic.

Allstate Milewise

Milewise from Allstate is very similar to Metromile, using a daily rate plus per-mile billing system. Rather than monthly billing, Milewise charges your prepaid account after you complete a trip. Your credit card gets billed when you reach your minimum account balance. Milewise uses an OBD-II device the works with an app on your smartphone. Besides mileage Milewise detects speed, time of day, location and specific driving events.

Esurance Pay Per Mile

Esurance is a subsidiary of Allstate. Its pay per mile product is similar, but not identical, to Milewise. Esurance pay per mile was introduced in 2015 and operates in Oregon. The daily mileage charge is capped at 150 miles. The biggest difference from Milewise is that Esurance bills monthly rather than by trip. The Esurance device records mileage and location.

Mile Auto

This product uses a low-tech method to count your miles. Every month, you snap a photo of your odometer and send it in. You’ll be billed on the miles you’ve driven, without any extraneous data. That’s a plus for privacy-minded drivers. The insurance is currently available in Oregon and Illinois. It claims to save as much as 40% over conventional insurance. Mile Auto charges a monthly base rate and a per-mile fee. The base rate depends on the standard insurance variables.

Who Uses Pay Per Mile Insurance?

Pay per mile makes sense for drivers who drive 10,000 miles per year or less. That might be perfect for retirees, urban commuters, Sunday drivers, empty-nesters, college students and weekend explorers. If you drive more than 10,000 miles per year, take the time to compare the prices of pay per mile and conventional car insurance.

Is Pay Per Mile Insurance Offered Everywhere?

No, it operates in the states selected by each insurer. Contact the insurer for the up-to-date list of states covered.

Does Pay Per Mile Insurance's Coverage Match What Conventional Auto Insurance Offers?

Pay per mile insurance offers just as good (if not, better) than traditional coverage. For example, Metromile insurance comes with collision, liability and comprehensive featuring several deductible levels, as standard and optional coverage. You can be covered for bodily injury, property damage, uninsured and under­insured motorists, personal injury, medical payments, rental reimbursement and emergency road­side assistance. In other words, pay per mile insurance is full coverage insurance.

How Much Could You Save By Switching to Pay Per Mile Insurance?

It all depends on your mileage. If you drive a minimal amount, you can save several hundred dollars per year. Metromile has a maximum daily charge based on a 250-mile mileage cap, which comes in handy if you occasionally take an extended road trip. Milewise and Esurance have a daily mileage cap of 150 miles. Esurance is a low-cost provider due its online-only business model, so its base and per-mile rates should be highly competitive.

Summary

Pay per mile is real insurance with a different billing method. The base rate depends on the typical insurance variables such as the age and driving history of the driver, the make, model and year of vehicle and more. If you don’t drive much and live in a state where pay per mile is offered, it’s definitely worth a look. You might end up saving several hundred dollars per year.

Don’t confuse pay per mile insurance with pay how you drive policies. The latter are standard policies that measure your driving  behavior and offer discounts to safe drivers. If you’re the parent of a teenage driver, you might prefer pay how you drive, because it can report the information it records, allowing parents to monitor whether their kids are driving safely.