pay per mile insurance
Updated November 14, 2020

Can Pay Per Mile Insurance Save You Money?

Auto Insurance

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Automobile insurance can end up being quite costly. The average annual car insurance cost in America is slightly over 1,300 dollars, a Quadrant Information Services study for 2018 suggests.

While there are factors affecting the cost of car insurance (age, driving experience, gender, etc.), the sum will still be pretty significant in the context of your other yearly expenditure. Needless to say, you may be looking for ways to reduce the cost of automobile insurance.

When doing so, you could have come across pay per mile insurance options. As the name suggests, these insurances utilize a model that’s different from the one used to calculate standard quotes.

Pay per mile could be the answer for certain types of drivers. Obviously, it’s not the most budget-friendly option for everyone, especially for those who have to deal with a lengthy daily commute.

If you don’t have to overcome such a hurdle, pay per mile auto insurance could be an option worth exploring.

What is Pay Per Mile Insurance?

The pay per mile insurance works by adjusting your insurance rate on the basis of the number of miles you’ve driven each month. Those who drive fewer miles than the average driver will benefit from significantly reduced insurance rates.

While in the past pay per mile car insurance used to be quite rare, today, several companies have enabled such possibilities for their customers. Metromile is one of these insurance companies.

The company’s pay per mile insurance is based on how much you drive and the cost is just pennies per mile.

Good to Know: According to some estimates, pay per mile auto insurance is most profitable for those who drive 500 miles per month or less. Thus, if you need to cover a long distance to work or to university every single day, you’re not the best candidate for the opportunity. Those, however, who rely on public transport most of the time but still own a car can produce significant car insurance savings by making a switch to the mileage-based model.

Things to Consider Before Making the Switch

Your car usage is obviously the most important thing to consider before making the switch to pay per mile insurance. The national US average for automobile driving is 13,476 miles per year. If you fall beneath this baseline number, pay per mile auto insurance could help you save money.

This, however, is only true for some programs. The most important thing to examine is the base rate and the cost per mile. In the case of Metromile insurances, the base rate starts at 29 dollars. You’ll need to submit your own details and the information of your vehicle to get a personalized cost per mile.

An Important Perk

The company offers a nice added perk – if you go on a long trip, you will benefit from free miles when you cross the 250-mile mark for the day. Thus, Metromile insurance is a good choice even for those who do some driving. In other instances, however, the cost per mile could be higher. If this is the case, you will need to do significantly less driving to get an affordable quote.

Always get offers from several companies and compare those side by side. There could be significant differences. Don’t underestimate your driving habits when considering the switch to pay per mile auto insurance. In the case of some programs, driving habits could also affect expenditure.

Breaking hard, driving in the middle of the night and other similar occurrences have been claimed to increase the cost of pay per mile insurance in some instances. Check what your insurance company will be tracking and how. Apart from the rate, this is the second essential element that will determine how much pay per mile insurance is going to cost you.

Pro Tip: If you’re not that confident in what your driving habits are, you may want to opt for a tool like Root in order to gain some clarity. Root is an app that you can download to assess your driving behavior, pinpoint problems and produce savings by resolving those.

How Exactly Does It Work?

If you’re already interested in the concept of pay per mile insurance, you may be wondering about how it works. How do the companies track your mileage? Is this tracking accurate? Is it possible to get overcharged because the manner in which the calculation is done was not carried out in the best way?

As pay per mile car insurance is still a relatively new phenomenon, such questions happen to be quite common. Metromile has come forward to offer an explanation. In their case, a device known as the Metromile Pulse is being used. The Metromile Pulse is a small device that’s plugged under the dashboard to accurately track and log your monthly miles.

How Are Monthly Rates Calculated?

Monthly rates are calculated on the basis of the information that the insurance company gets from the tracker inside the car. In the first month of coverage, the driver will be charged the respective base rate listed in the quote.

In the end of the first month, the next month’s base rate will be calculated, as well as the overall mile cost for the previous month. Thus, your pay per mile auto insurance is flexible. It will vary from month to month and you’ll actually be charged on the miles you’ve driven rather than an average.

Some Common Questions about Pay Per Mile Insurance

Before making up your mind about pay per mile car insurance, you probably have some other questions that need to be addressed.

We’ve tried to summarize some of the most frequent inquiries.

What is the Type of Coverage?

Do pay per mile insurance companies offer full coverage? If not, what is it exactly that they make available to customers? Companies like Metromile offer a range of packages and coverage opportunities. There are four levels of liability protection, plus various choices for collision or comprehensive deductibles.

Some of the services the company has made available with its insurance plans include collision coverage, bodily injury, property damage, medical payment coverage, 24/7 roadside assistance, rental reimbursements and under/uninsured motorist coverage.

Is It Possible to Add Multiple Vehicles to the Policy?

You will need to check with the respective company that you’re interested in getting insurance from. In the case of Metromile, drivers can have multiple cars on the same policy.

The company offers a multi-car discount that makes the pay per mile insurance even more affordable. The discount will apply to both the base rate and the per mile charge for every individual vehicle added to the same policy. Thus, if you have several family cars and you want to save even more money on auto insurance, this possibility will definitely be one worth exploring.

Is Pay Per Mile Insurance Still Affordable if Driving Habits Change Significantly for a Month?

We all know that even if you don’t use your car all that much, there will be months in which your typical mileage is going to change. Say you go on vacation and you don’t drive at all a certain month. In such instances, only the base rate will apply to the month and it will be the one you’ll have to cover when you get back home. On the other hand, you may have to take a long trip because of family or professional issues the next month.

Pro Tip: As already mentioned, Metromile caps the daily miles being tracked and charged at 250. Even if you take a lengthy trip out of state, you will not have to pay for more than the initial 250 miles of the journey. Those looking at other pay per mile insurance service providers will need to double check and figure out what the billing conditions will be for months with out of the ordinary mileage.

Do Standard Insurance Cost Factors Still Apply?

The short answer here is “yes.” When you get your pay per mile insurance quote, you will have to fill out a questionnaire.  Some of the questions will focus on your age, occupation, driving record, type of vehicle being used.

Factors like your gender, the age of the automobile, your age, credit history and the length of prior insurance will affect your base rate and the cost per mile. For certain drivers, this type insurance is going to be much more affordable than for others who are considered to be a higher risk for the company.

How Do You Start a Claim?

The process of starting a claim if you have pay per mile auto insurance isn’t that different or unusual. Usually, there’ll be an online option for starting a claim.

Depending on the accident and the type of coverage, roadside assistance may be requested from the insurance provider. The insurance company is once again responsible for identifying the right repair facility for handling the problem.

Some aspects of the process are standard – you will still have to collect evidence, get an appraisal and submit the necessary documentation. Metromile makes it possible to start a claim on your phone and to track the entire process from a mobile device for added convenience.

Get your Metromile quote and learn about the terms and conditions of pay per mile insurance here.

A Metromile Overview: Is This the Best Pay Per Mile Car Insurance in the US?

Metromile has a big number of loyal customers who are happy with the terms and conditions offered by the company. Before joining the ranks of the Metromile clients, however, you’ll have to make sure that the pay per mile insurance is the right one for you.

If you like a tech-savvy solution and you drive less than the national average, you will benefit from the company’s pay per mile solution and you will get to save some money along the way. One thing you have to keep in mind, however, is that certain types of coverage are mandatory in certain states. Thus, apart from the base rate and the cost per mile, you may also have to pay for the additional types of coverage that are mandated by law.

Personal injury protection, for example, is mandatory in the state of Oregon. It’s best to check local regulations and requirements before you consider the switch to a brand new coverage type like pay per mile car insurance.

Where Can You Get Metromile Insurance?

Unfortunately, Metromile coverage is currently not available in all parts of the US. At the time being, pay per mile coverage is being offered to clients in Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia and Washington.

Check the company’s website every now and then to find out if pay per mile coverage has become available in your state. Keep in mind that the pay per mile terms and conditions could vary depending on your location. According to Metromile’s presentation, for example, the daily cap of 250 miles is applicable to all states apart from New Jersey. There, the limit is luckily lower and currently set at 150 miles per day.

The Biggest Advantages of Metromile

Anyone who’s an occasional driver and who would like to save some on auto insurance will benefit from pay per mile quotes. Metromile does offer an excellent product for these drivers.

Here’s a brief list of the biggest advantages of opting for Metromile pay per mile car insurance.

  • There is no penalty if you occasionally have to drive more than 250 miles in the same day.
  • The pay per mile rates are pretty good in comparison to what some of the company’s competitors have to offer. To track miles, Metromile provides a small device that’s simply plugged inside the car.
  • This device can also be used to learn a bit more about your driving habits and the ways to reduce commute expenditure.

Good to Know: Apart from the pay per mile insurance, you can also get comprehensive coverage, as well as a number of add-ons. Roadside assistance is also available.

A Few Metromile Shortcomings

The biggest disadvantage is the fact that Metromile isn’t currently available across the US. Most states aren’t being served and if you’re located in one of them, you’ll either have to opt for an alternative or you’ll have to wait for the Metromile offer to become available.

If you are a person who drives a lot every single month, you’re also not going to benefit from pay per mile coverage. Certain groups of drivers may also have to spend quite a lot on their pay per mile coverage.

Quote requests for young and inexperienced drivers have sometimes produced pretty steep base rates and charges per mile. Still, the Metromile opportunity is worth pursuing even if you are traditionally considered to be a high-risk driver. The manner in which the pay per mile quote is calculated could give you a saving over standard car insurances.

Final Verdict: Should You Pursue Pay Per Mile Insurance to Save Money?

The car insurance sum you’re spending right now isn’t necessarily the most affordable option for you. This market is very dynamic and new products become available all the time. Some of these new products may be worth pursuing. Pay per mile insurance is a good choice for those who have a car but who don’t drive a lot every single month.

Good to Know: The right kind of pay per mile insurance could contribute to serious monthly and annual savings. The best aspect of this model is that you’re getting charged for your car usage, not for the ownership of the vehicle itself. To determine whether pay per mile auto insurance is a good choice, you should simply request a quote from one of the top service providers. Based on this information, you can easily calculate the savings and find out if the switch is justified.

If you already have some experience with pay per mile insurance and you’d like to share it with us, feel free to list some of your opinions in the comments below.

Logan Allec, CPA

Logan is a practicing CPA, Certified Student Loan Professional, and founder of Money Done Right, which he launched in July 2017. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.

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