How Pay-Per-Mile Car Insurance Works: The New Solution for 2021

How Pay-Per-Mile Car Insurance Works: The New Solution for 2021

Hannah Warren

by Hannah Warren
Contributing Writer

July 11, 2021
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How Pay-Per-Mile Car Insurance Works: The New Solution for 2021

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The pandemic has changed the way we work, and the sudden turn to remote work part or full time is here to stay. We’re going to have more flexibility than ever before in 2021 and beyond, and so the car you once did 50 miles or more in a day is likely now doing less than 10. If you’re ready to save money on more than fuel for these reduced miles, keep reading.

What is Pay-Per-Mile Car Insurance?

Pay-per-mile car insurance is exactly what it sounds like – it’s insurance where you only pay for the actual miles you drive in your vehicle. That means any time your car stays on the driveway, you’re not actively paying for the insurance.

This type of insurance is ideal for anyone who typically only makes quick trips into town on a daily basis, or only drives their vehicle a few times a week. It uses a device that plugs into your car’s diagnostics or tracks you via an app on your phone to charge you for your use. Pay-per-mile car insurance has a base insurance rate, so you still pay a monthly fee, and then a per-mile rate. The per-mile rate typically has a cap of about 250 miles in one day. That can make a road trip a no-go.

The base rate and per-mile rate will be determined via the same factors that normally impact your insurance quotes, such as age, time driving, gender, and so on.

How much will Pay-Per-Mile Car Insurance save me?

This depends entirely on your driving habits and current traditional insurance costs, but the companies that offer pay-per-mile car insurance quote a saving of 10-40%. You can find out more about each company below.

Which companies offer Pay-Per-Mile Car Insurance?

Currently, the companies that offer pay-per-mile car insurance are (in alphabetical order):

  • Allstate (Milewise) – you need a plug-in device for your car and a mobile app. You’ll be charged a base rate and a per-mile rate. Despite the name, they don’t actually cover all states, they cover AZ, DC, DE, FL, ID, IL, IN, MA, MD, NJ, OH, OR, PA, TX, VA, WA, WV. They believe you can save around 20% per 10,000 miles. \

  • Metromile – you need a plug-in device for your car and you pay a base rate and a per-mile rate. They also monitor driving behavior in some states which affect what you’re charged, which are marked with a * in the following list of states they cover: AZ, CA, IL, NJ, OR, PA, VA, WA. They believe their customers save $741 a year on average. \

  • Mile Auto – if you don’t like the idea of a plug-in device, Mile Auto simply requires a photo of your odometer (mileage) each month. You pay a base rate and a per-mile rate. The biggest issue with Mile Auto is that they’re currently only available in 3 states (as of July 2021): GA, IL, and OR. They believe you’ll save 30-40% on your current policy. \

  • Nationwide (Smartmiles) – you need a plug-in device and you’ll be charged a base rate and a day rate. They cover most states, including AZ, CO, CT, DC, FL, IA, ID, IL, IN, KS, MD, ME, MN, MO, MT, ND, NE, NH, NM, NV, OH, OR, PA, SC, SD, TX, UT, VA, VT, WA, WI, WY. They only believe you’ll save “up to” 10%.

Is Pay-Per-Mile Insurance comprehensive?

Yes, that’s the key reason for the base rate – your car will be covered when it’s parked. However, make sure you check with your individual insurer that this is the case for your policy.

Is Pay-Per-Mile Car Insurance right for me?

If you live in an area close to your local amenities and work from home, or prefer to walk when possible, then pay-per-mile car insurance may save you money. However, if you find yourself driving every day, even just for short journeys, you may find that it’s not more cost-effective, especially if you’re a mature driver with a great driving history and have over 7 years of no-claims.

It’s important to be realistic about how many miles you actually use, especially as lockdown eases and we start getting out and about again, even while working from home. Take a week or two and note down your mileage each day, and get a realistic view of your driving habits. Similarly, if you’re thinking of cutting down on the miles you drive and walking or cycling instead, try that out for a few weeks before you make the switch. This may sound like a great idea now in the summer, but a heatwave or bad weather in the winter may change that for you.

Also, consider extenuating circumstances – is it a possibility that you’ll need to get in the car and drive more than 250 miles? This won’t be a problem for most, but if you have elderly parents that live 300 miles away, the last thing you need to be worrying about if you have to travel suddenly is the fact that you won’t be insured. If you have a great driving history and low-cost insurance, you may not find it worth the worry.

Conversely, if you’re only going to be driving a car once a week or less, look into temporary day car insurance, as this is becoming more accessible and you can often buy insurance online for the day in just a few minutes.

With such widespread change in our habits, pay-per-mile insurance may prove to be the best way for many people to cut their driving costs down significantly. However, it’s important to do the math and be realistic about the miles you drive, especially if you’re facing a cancellation fee from your traditional auto insurer.