Revolutionizing Auto Insurance: The Pay-Per-Mile Model Explained 

  

  

 Drivers who don't have a lot of miles on their odometer have so-called "good problems." By reducing your mileage, you put less wear and tear on your car, which saves you money at the gas station and reduces your chances of being involved in an accident.

These are great things. However, the premiums you pay may not compensate you for the small amount of driving you do.

Pay-by-the-mile insurance is designed to let you manage your monthly insurance costs based on how much time you drive.

How Pay-Per-Mile Insurance Works

“It’s directly related to how many miles people drive and how likely they are to have an accident,” said Rick Chen, a spokesman for Metromile, a pay-by-mile insurer that Lemonade plans to acquire in 2022. Many people take this route regularly. this That can affect how much you pay, as an overall rise in accident repair costs or injury costs increases everyone's rate.

"Insurers have to cover these types of cases in their prices," Chen said. List. "They cover the entire customer base."

In fact, insurance companies offer discounts for people who travel less, and discounts usually start when your miles fall below a certain threshold, such as 8,000 miles per year.

With a pay-by-the-mile policy, you get the same type of coverage as traditional auto claims insurance Teresa Scharn is Vice President of Product Development for Personal Lines at Nationwide Insurance. It includes comprehensive insurance and collision insurance as well as Uninsured motorist insurance and roadside assistance. However, you have more control over how much you pay because it's calculated in part based on the miles you actually drive.

A mile-by-mile policy has a monthly or daily base price that is based on the same factors as traditional insurance policy rates, such as the age of your driving record and your vehicle location and credit. Therefore, the base rate can It varies from person to person.

There is also a cost per mile. The cost per mile varies from person to person, depending on variables that determine the base rate based on Scharn. Also, the amount you pay may vary from month to month, depending on how many miles you travel. Monthly fees are generally fixed Calculated based on miles driven in the previous month.

Discounts are also available. In California, for example, Metromile offers discounts to mature drivers, good drivers, who own more than one vehicle and have automatic recovery.

Here's an example of an ideal meter-by-mile plan, where a typical monthly payment would look like this: You pay a base rate of $29. For the month, you pay a mileage rate of 5 cents. If you travel 500 miles in a month, you will be billed $54 for that month. Add $29 base rate 500 miles times $0.05 equals $54).

Pay-by-mile insurance should not be confused with usage-based auto insurance, which focuses on safe driving behaviors, such as braking or accelerating, with less emphasis on actual miles driven.

How miles are measured

For a pay-by-mile plan to work, the insurance company must have an accurate way of counting the miles you drive. They usually use a small tool (called OBD-II) that connects to a port near the wheel. Depending on your insurance company, you may need an older car for the equipment to work properly. Certain devices, such as those manufactured by Nationwide, are not compatible when used with hybrid vehicles.

Chen says the Metromile device monitors your car's location in addition to mileage, but the location feature can be turned off for privacy reasons, Chen claims. If you leave it on, you can use it with the Metromile app to monitor and plan your trip, Monitor fuel costs for every trip and track your vehicle in the event of a theft. Metromile has a feature for Arizona and Oregon that monitors driving patterns and lets those who are safe get the lowest prices.

If you don't like the idea of ??keeping a device in your car to track mileage, another option is Mile Auto, which requires policyholders to take a photo of their odometer every month to log mileage.

Pay Per Mile Insurance Cost

Pay-per-mile insurance rates vary from company to company. Rates can vary by driver, just like traditional auto insurance.

For example, Scharn claims that the base rate for Nationwide's SmartMiles program is about 30% of the standard Nationwide auto insurance plan premium. If the annual cost of a traditional policy is $1,000, the SmartMiles rate might be $300. cost It varies from 6.5 cents per mile. However, it can vary from 2 cents to 10 cents, according to Scharn.

Liberty Mutual's ByMile and Mile Auto say customers can save up to 40 per cent on regular insurance premiums. Metromile claims its customers save an average of $741 per year. The website shows base rates starting at $29 per month, but Chen claims Metromile's customers pay less. This According to Chen, the typical cost per mile is between 5 and 7 cents.

In contrast to other pay-per-mile insurance plans, Allstate Milewise charges a daily fee and a per-mile fee. You will need to link an account with a debit or credit card to your account. Fees are collected after the trip.

Certain plans have limits on the number of miles you can pay per day. If you take a long road trip and don't need to pay big bucks. For example, Metromile and Nationwide don't charge for driving more than 250 miles in a single day. Liberty Mutual does not charge any fees Over 150 miles in one day.

Who is the beneficiary of a pay-by-the-mile insurance policy?

Obviously, those who drive less often can keep costs down by switching to pay-by-the-mile coverage. But what is "not driving much"?

According to the Federal Highway Administration, the average American drives 13,476 miles a year. It's best to take fewer trips to keep insurance costs down by paying by the mile, Chen said.

For example, if you pay a monthly base rate of $29.90 and a mileage rate of 5 cents, and drive 500 miles per month, you'll pay $54 per mile per month for car insurance. If you were driving at the same rate as the average American per month (1123 miles), you would Pay around $185 per year.

When you're weighing your travel volume, don't overthink the time your journey will take, especially if you spend time driving through heavy traffic.

"It's not about the time you spend sitting in the car. It's about the distance you travel," Chen said. "For most people, they just don't drive very often."

Owners who do not drive many miles may be:

People who take public transport to work but can only drive on weekends

work from home, not travel

Car rental for people characterized by strict mileage limits

Faculty students living on campus.

Seniors who aren’t driving often

Pay-by-the-mile insurance plans may appeal to those looking to save money on actual miles driven, rather than plans that focus on driving habits like usage-based auto insurance.

Try it out before buying it

If you're not sure whether pay-by-the-mile car insurance is the right choice for you, track your driving miles before signing a contract. Metromile recently launched its RideAlong app, which counts the miles you drive in a 17-day period. It will then determine your monthly bill If you're a Metromile customer, you'll pay fares and other charges.

Another option is to download an external mileage tracking app on your phone to monitor your mileage. There are paid and free apps that run in the background and track your mileage. It's a great option for tracking mileage, even if you don't keep Consistent driving habits, such as school or work.

How do I get paid per mile insurance?

Allstate Metromile Mile Auto and Nationwide are among the companies that offer pay-by-the-mile coverage. With these four types of coverage, you can request a quote online and find out how much you'll have to pay for coverage in relation to the miles you travel.

Drivers Interested in Mileage-Based Auto Insurance See Opportunity to Cut Costs

According to the 2021 Telematics Consumer Survey conducted by Arity, a company that provides telematics and analytics, two-thirds (64%) of survey respondents expressed interest in mileage-based auto insurance. It was founded by Allstate. Many drivers see this insurance As an opportunity to reduce premiums.

In the survey, 41 percent of respondents already considered their driving to be low, while 39 percent were considering mileage-based auto insurance as a way to better control insurance costs. Other reasons respondents were interested in mileage-based insurance included The convenience of being part of an insurance plan and tracking your miles driven and more insight into the cost of auto insurance.

Not everyone is enthusiastic about the idea of ??mileage-based car insurance. Of those who said they were not concerned, 41 percent said they were satisfied with their current insurance. Three-quarters of respondents said they were uncomfortable with being able to track their driving habits. Some Respondents (28%) thought mileage-based insurance was too complicated, and 24% said they didn't think they would save enough money with a mileage-based auto insurance plan.