Pay-by-the-mile car insurance offers flexibility and savings for some drivers. Is it a good option for you?
Pay-per-mile car insurance is straightforward: you pay for what you drive. Insurance companies' reason for offering 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. Surprisingly, not many insurance companies offer by-the-mile payment plans. Let’s explore pay-per-mile car insurance and the companies offering it.
Pay-per-mile car insurance policies use an in-car device to track the number of miles you drive per month in order to determine your rate. Your insurer charges a base rate plus a per-mile fee, which is used to calculate your premium. Your base rate consists of standard rating factors such as your driving history, age, gender, and vehicle type.
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 larger impacts on your rate than how much time you spend behind the wheel. While these non-driving factors are taken into account when pricing pay-by-the-mile auto insurance, they aren't weighted as heavily.
Although it seems simple, per-mile auto insurance is uncommon. In its purest form, only two insurance companies provide pay-per-mile insurance: Metromile and Esurance. Let’s examine how these programs work.
Metromile uses two things to determine your rate: your driving profile and your monthly mileage. Your monthly driving amount is calculated through “Metromile Pulse.” The company uses a wireless device that plugs into your vehicle’s OBD-II port to count the distance you drive. You can monitor your mileage through the Metromile app.
In addition to charging you based on the number of miles you drive, Metromile charges a monthly base fee. The base rate is determined by a driver's profile, so it’s hard to give an accurate estimate of Metromile rates. Because the number of miles you drive per month may vary, your bill may change by the month.
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. But they offer this usage-based driving program in addition to a more standard insurance program. They advertise a program for low-mileage drivers specifically, with low-mileage drivers traveling fewer than 10,000 miles per year. Esurance’s pay per mile is only available in select states and excludes electric vehicles and hybrids.
Esurance's pay-per-mile insurance program uses a plug-in device in the OBD-II port to record your mileage and determine your per-mile fee. Your base rate is assigned based on your age, gender, driving history, and vehicle-specific information. If your mileage fluctuates, your bill will vary.
Pay-per-mile and telematics-driven insurance policies are similar but use different metrics to calculate your premium. Pay-per-mile insurance does not take into consideration your driving habits or behaviors, while telematics auto insurance relies upon driving behavior metrics to assign your premium. A telematics device will track abrupt braking, sharp turns, high speeds, and late-night driving to assess the risk you present to your insurance company. By using this granular data, telematics offers a holistic examination of your driving profile.
Here are some estimated discounts you can possibly expect from telematics:
Pay-per-mile auto insurance is meant as a money-saving option for occasional drivers. Metromile advertises its system of car insurance as a way to save you $500 per year, and Esurance promotes similar savings. If you’re a low-mileage driver who lives in an area with pay-by-the-mile insurance availability, it could be a solid option. Because Esurance offers both traditional and pay-per-mile insurance policies, you can easily access a side-by-side comparison of both rates to gauge which would be cheaper for you. Metromile offers pay-per-mile car insurance exclusively. The best way to assess the value of pay-per-mile car insurance is to assess your options and get quotes from multiple insurance companies.