Pay as You Go Car Insurance 

One new coverage option with a growing number of drivers trying it out is “pay as you go car insurance.” Although only introduced into the market about five years ago, its popularity has steadily been growing, especially among millennials. 

More people are signing up for pay as you go car insurance to get their premiums down to reflect their actual lower risk, as low-mileage-motorists. With this type of “pay for when you drive” insurance program, some drivers have been able to cut their insurance bill in half.

What is Pay as You Drive Auto Insurance?

It is designed for a new segment of motorists that do not drive much, who only want to pay for insurance per mile driven, thus the name “pay as you go” car insurance. For years, many low-mileage drivers have been frustrated by paying the same rates as other motorists that drive 200% and 300% or more miles per month. 

With “pay as you drive insurance,” you are only charged for the miles driven in a given month. It helps eliminate the market disparity from drivers who were charged a flat premium but drove very little. 

Pay as You Go Car Insurance Rates are Based on Miles Driven 

This type of niche insurance is merely paying for auto insurance for the actual miles you drive. For decades, many motorists were charged a flat fee for coverage, even if they drove very few or no miles at all. In fact, one of the upstarts in the pay as you go insurance market, Metromile, estimates that about 65% of drivers overpay. 

Drivers who pay too much for years have subsidized high mileage motorists who don’t pay enough. Pay to go auto insurance has the main objective to create a fairer set of insurance pricing for the total miles you drive. Compare rates now and see how much you can save. Just enter your zip code to get started.  

How Does Pay as You Go Insurance Work?

A small tracking Telematics device is installed in your automobile, which is about a typical smartphone size. The device then records and analyzes your driving behavior. It includes:

• The number of Miles You Drive Each Day 
• How Fast You Drive
• How You Brake 
• When You Drive

The device streams this data to the insurer, who then crunches it and comes up with a rate profile. In general, the more miles you drive and the riskier you are behind the wheel, the higher your rates will go. Likewise, the less mileage you use each month and the safer you drive, the less you will pay for coverage.

Another benefit of a mileage-based policy is that many insurers will let policyholders check the Telematic data online. It will help motorists improve in areas they are weak in. If driving improvements are made, they can qualify for a cheaper rate during the next payment period.

It’s important to note that each insurer sets its own pricing for the miles driven. Rates can also vary on where you are driving and what hours you drive the most. You’re more exposed to an accident driving in rush hour traffic in downtown Los Angeles, such as going to your local gym, two miles away, at 9 pm. Overall, the less risky your driving profile is, the lower your rates.  

Companies offering Pay Per Mile Car Insurance    

Four insurers currently offer mileage-based insurance policies. 

• Mile Auto: This new insurer offers coverage in Georgia, Illinois, and Oregon.  
• Metromile: A market leader sets rates from $29 per month plus $.06 per mile driven. Metromile offers coverage in Washington, California, Oregon, Illinois, Oregon, Arizona, Virginia, Pennsylvania, New Jersey.   
• Nationwide SmartMiles: Coverage is available in 21 states: Arizona, Connecticut, Colorado, Idaho, Iowa, Indiana, Maryland, Illinois, New Hampshire, New Mexico, Maine, New Mexico, Nevada, Oregon, Pennsylvania, Ohio, Texas, Utah, Wyoming, Washington, Virginia, Vermont,
• Allstate Milewise: Currently offers coverage in thirteen states: Arizona, Idaho, Delaware, Indiana, Illinois, Maryland, New Jersey, Ohio, Oregon, Texas, Virginia, Washington, and Virginia.  

To compare the best rates and coverage options, enter your zip code and fill out a free online application.  

Types of Coverage Offered

Like with any typical insurer, “pay as you drive” car insurance companies offer the standard three coverage types. These are: 

• Liability
• Collision
• Comprehensive 

If your vehicle is leased or financed, you will probably be required to buy comprehensive coverage. With full coverage pay as you drive insurance, you can still save 30% or more if you drive less than 800 miles per month.    

Who Needs Pay as You Go Car Insurance?

Let’s face it; car insurance is an expense that most people have to pay. While coverage is mandatory, there are new options available that can lower your premiums by 50% or more. With the average annual U.S. car insurance cost about $1,321, you could potentially save $650 or more by switching to pay as you drive insurance.

For those on a very tight budget, like students, this could be the difference between making it through the month or falling behind. Here are some typical drivers that can take advantage of pay as you drive auto insurance:

• Who Don’t Drive Much – Less Than 1,000 Miles Per Month
• You might commute to work on a bike or get a ride with a co-worker and just don’t drive much 
• Anyone who Work at Home and Don’t drive too Much
• You Drive Safely 
• A low-mileage, Safe Driver under the age of 25 and need to Lower Your Rates  

Who Can Sign-up for Usage-Based Auto Insurance Coverage? 

Every driver is free to apply for coverage of this new type of auto insurance program only available from four companies in selected states. Insurers use their own rating factors to determine if you qualify. High-risk drivers that have a history of tickets and accidents might not be eligible.  

Usage-based car insurance is most popular with millennials aged 21 to 40 who embrace new technology and are tired of paying more for auto insurance based on their youth.  

What Needs to be Installed to Track my Mileage? 

There’s no unique technology you need to buy to start using pay per mile auto insurance. The insurer you sign-up with will give you the device, but you need to install it. The device simply plugs into your vehicle’s on-board diagnostics port, which are standard features on all automobiles made since 1996. If your car is a 1995 model or older, it might be challenging to install. Most “pay as you drive” companies allow you to track your miles driven and driving performance with your smartphone.     

Advantages of Pay as You Drive Car Insurance 

The main advantage of pay as you go car insurance is that the driver can control the monthly coverage cost. For example, with Metromile, rates start at $29 a month, with $.06 for each mile driven. If a driver averages 500 miles a month, that’s a low monthly rate of just $59, which is about half that of the median national average of $117. 

It is indeed a considerable cost saving for safe motorists that don’t drive too much. It can add up to a saving of $600 or more per year. Pay as you go auto insurance helps drivers control monthly auto insurance costs and gives them more control over what they pay.    

Disadvantages of Pay as You Drive Car Insurance 

The main disadvantage of pay as you drive auto insurance is driving too much. Driving a lot can really increase your monthly rates. For example, let’s say a person used their vehicle for a delivery service and began driving more than 2000 miles per month. It would undoubtedly cause rates to go to $159 a month and higher, which is above the national average. Another disadvantage is people feel constrained and not as free to drive, knowing they will be charged for each mile driven.  

Conclusion

For safe motorists that drive less than 800 miles per month, pay as you go car insurance can save you $300 or more per year. It puts control of the cost of insurance coverage in the driver’s hands. The service is easy to sign-up for, and you can track rates online with your smartphone. Pay as you drive car insurance just might be the future. To compare rates and plans, enter your zip code to get started.