With consumers looking for ways to trim costs, insurance companies seeking options to increase their profits, and seemingly everyone interested in protecting the environment, pay-per-mile insurance has been gaining in popularity.
What Pay-Per-Mile Coverage Covers
Also known as pay-as-you-drive (PAYD) or usage-based insurance, this form of auto liability protection essentially determines part or most of your premiums based on your driving habits. In its simplest form, pay-per-mile insurance only takes the number of miles you drive into account. In its most complex form, it assesses how much, when, where, and even how you drive.
Depending on your insurance company, your driving habits will be tracked by either installing a small device which plugs into your car, by using your global positioning system (GPS), or by simply having an insurance company representative look at your odometer readings.
The plug-in device allows your insurer to record when, how much, and how fast you drive, as well your braking habits. But, it doesn’t record where you drive. GPS-based systems, however, can do this, along with recording how often and when your drive. But, they can’t assess your speeds and braking tendencies.
Who Needs Pay-Pay-Per Mileage Coverage
Generally speaking, you could see a reduction in your premiums through pay-pay-mile insurance if you:
- Don’t drive much.
- Avoid driving during peak traffic hours.
- Drive in uncongested areas.
- Practice safe driving habits.
The more that apply to you, the greater the chances you could benefit from this coverage, and the higher your potential savings.
Where to Get Pay-Per-Mile Coverage
While this type of coverage has been spreading fairly quickly throughout the country, it’s still only available in some states and through a few insurance companies. If your carrier doesn’t provide the coverage, do an online search for insurers that offer pay-per-mile insurance, and then see if they allow this program in your state. Or, just call the toll-free numbers provided by insurance companies, and ask a representative. Your state insurance department may also be a good source of information on this matter.
How Much Pay-Per-Mile Coverage Costs
While one major study showed that an estimated two-thirds of Americans households would save about $270 per car by using this type of insurance, it’s not the best choice for everyone. In fact, if you don’t fit any or most of the categories listed above, your rates could increase, based on your driving habits. Plus, depending on the insurer, you may have to pay for the monitoring device or service.
But, for drivers who rarely use their cars, pay-per-mile coverage could be a blessing, especially for those with low incomes. Insurance companies, meanwhile, realize a reduction in the miles driven per customer leads to a disproportionate increase in their profit margins, so these programs are money-makers for insurers.
And, from an environmental view, a decrease in car use means fewer emissions entering the atmosphere.
