It’s no secret that auto insurance is expensive. The average driver pays $800 to $2,000 a year. Your premiums depend on where you live, the type of car you drive, and your driving history.
But what if you could save hundreds of dollars a year on car insurance? You can with this little-known hack called pay-per-mile auto insurance.
What is Pay-Per-Mile Auto Insurance?
Typical car insurance premiums are based on the average miles any driver drives plus personal factors like the type of car and driving history. But if you don’t drive often, drive during ‘safe hours’, and have good driving habits, you can save money on your car insurance.
Who Should Use Pay-Per-Mile Auto Insurance?
The average American drives 11,500 miles per year and that’s what insurance companies use to determine premiums. But if you don’t drive nearly 11,500 miles per year, you could use pay-per-mile insurance and get cheap auto insurance.
To decide if pay-per-mile auto insurance is right for you, consider your driving habits and how many miles you drive a year. If you work from home, are a college student, or have a car that you barely drive, like a second car, pay-per-mile insurance can save you hundreds of dollars.
How Does it Work?
To get pay-per-mile auto insurance you must plug a small device into your car’s service port or use the company’s telematics system. The systems track your miles driven and charge you based on what you drive, not the average miles driven by everyone.
Some systems also track your driving habits, including your speed and how hard you brake. If you have good driving habits (don’t speed and don’t brake hard), you’ll save the most on your car insurance.
Some companies charge less if you drive only during daylight hours too. Nighttime driving is riskier for insurance companies as there are more accidents and issues at nighttime, especially late at night, versus during the day.
Who Offers Pay-Per-Mile Insurance?
Many companies like Allstate, Geico, Metromile, and Nationwide offer pay-per-mile options. Each company works differently, though. Allstate Milewise® for example charges a fixed amount each day and then you pay per mile driven. Your per-mile premium rate will change based on your driving habits of the previous six months.
Metromile charges $40 a month for insurance plus $0.05 per mile driven. In some states, they also base your rates on your driving habits which they track with the device in your car.
Final Thoughts
If you’re looking for cheap auto insurance and don’t drive more than 11,500 miles per year, consider pay-per-mile auto insurance. Don’t pay for insurance you don’t need. Pay-per-mile insurance still meets the minimum requirements by law since you’ll have liability coverage, but you won’t pay the premiums everyone else who drives a lot more pays each month. Check out the insurance options offered by many companies including Allstate, Geico, and Metromile to see which one is right for you.