Pay Per Mile Car Insurance

There's a new way to do car insurance, which means a new way to save.

Pay Per Mile Car Insurance


The idea and appeal of pay per mile car insurance is pretty straightforward: you pay for what you drive. The insurance logic behind it makes sense too: the more you drive, the more time you’re on the road, and the more likely you are to get into an accident. However, there aren’t a lot of insurance companies that offer this type of product, whether that be a version of it or as the concept is defined. Let’s explore the idea of pay per mile car insurance and the insurers that offer it.


Understanding Pay Per Mile Car Insurance
  1. How does it work?
  2. Which insurance companies provide it?
  3. How does it like to telematics?
  4. Does it save you money?




How does it work?


Pay-per-mile car insurance works by using an in-car device that tracks the number of miles you drive per month in order to determine your rate. Your insurer will charge you a base rate plus a per mile fee which, in turn, will be used to calculate your premium. Your base rate comprises of standard rating factors such as your driving history, age, gender, and vehicle type.

The appeal for this system is low-mileage drivers. While your annual mileage is a rating factor for determining your rate, it’s not a major contributor to your overall premium (unless you’re in California). Other non-driving factors such as your age and credit score have more of an impact that how much you’re actually behind the wheel. While these non-driving factors are employed in pay per mile car insurance, they’re not as heavily weighted.





Which insurance companies provide it?


Although this seems like a pretty easy way to handle car insurance, it’s not a very common practice. In its purest form, only two insurance companies provide pay per mile insurance - Metromile and Esurance. Let’s examine how their programs work.


Metromile

Metromile is a car insurance company which uses two things to determine your rate: your driving profile and your monthly driving amount. The way the use “driving profile” is pretty industry standard and consists of your age, vehicle, and driving history. Your monthly driving amount is calculated through their “Metromile Pulse.” Basically, Metromile uses a free wireless device that plugs into your vehicle’s OBD-II port where it’s able to count the number of miles driven. You’re able to motor the miles you’ve driven through their app.

In addition to charging you based on the number of miles you drive, Metromile charges you a monthly base fee. Your base rate is determined ny your driving profile, so it’s hard to give an exact estimate for your premium with Metromile. Plus, because the number of miles you can drive per month varies, your bill will vary as well.

Although their pricing works differently than other providers, Metromile still provides the same types of coverages; liability, uninsured motorist, collision, comprehensive, and other additional coverage options that standard insurers provide.

As of right now, Metromile is available in California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington.



Esurance

Esurance’s pay per mile system works a little differently than Metromile’s. Esurance isn’t a strictly pay per mile car insurance company like Metromile is. But they offer this usage-based driving program in addition to a more standard insurance program. They advertise their program for low-mileage drivers specifically, with low mileage drivers being under 10,000 miles per year. Moreover, Esurance’s pay per mile is only available in Oregon and excludes hybrid and electric vehicles.

Outside of these exclusions, Esurance’s plan works like Metromile’s. Their program uses a plug-in device in the OBD-II port that tracks and records your mileage. From this, your base and your per-mileage fee are determined. Your base fee is again determined by things like your age, gender, driving history, and your vehicle-specific information. And, just like with Metromile, if the number of miles you drive varies, your bill will vary.





How is this different than telematics?


Pay per mile and telematics have certain similarities but are ultimately different based on the metrics used to calculate your premium. Pay per mile insurance does not factor driving habits or behaviors into their calculations like telematics are designed to do. By driving habits, we are referring to things like harsh stops, sharp turns, high driving speeds, or late-night driving. Telematics uses these to determine what kind of risk you will present to your insurance company. By using these driving habits, telematics offers a more holistic examination of your driving profile.

Here are some estimated discounts you can possibly expect from telematics.


Company Estimated Savings
Progressive's SnapShot Average of $130
Allstate's Drivewise Average of 10-25%
State Farm's Drive Safe & Save Up to 15%
Esurance's DriveSense Varies
Nationwide's SmartRide Up to 40%
Liberty Mutual's RightTrack Average of 5-30%




Is it worth it?


The idea for pay per mile insurance is to save money. Metromile advertises their system of car insurance can save you $500 a year and Esurance promotes a similar idea. If you’re a low mileage driver and live in an area where these programs are viable, this might be a good way to save. Because Esurance offers both forms of insurance, they offer a side-by-side comparison of both rates so you can see which one will be cheaper for you. Metromile is exclusively a pay per mile car insurance provider, so this option isn’t available. Your best option for determining if it’s worth it is to see for yourself.



Compare rates and start saving today!

Additional Resources:

Pay Per Mile Car Insurance

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