How Does Inexpensive Pay-Per-Mile Car Insurance Work?

Remember when cell phone plans first hit the market? The ones where you got charged a flat monthly rate no matter how many minutes you used? Then came the pay-per-minute plans, or those with a certain number of minutes included, and they were a hit with customers. After all, it makes more sense to pay only for the minutes you talk.

What is Pay-Per-Mile Insurance?

If your automobile insurance rates are based on the risk of getting into an accident, does it sound fair that you’re charged the same amount whether you drive 1 or 1,000 miles every month? Pay-per-mile auto insurance gives you the freedom to choose how much you drive and pay only for the miles you drive. This means the less you drive, the cheaper your auto insurance is.

How Pay-Per-Mile Insurance Works

The per-mile cost is calculated based on your driving record, vehicle type and geographic location, which are usual factors in the calculation all insurance agencies perform. The insurance company gets periodic readings from the odometer or from sensors installed in your car. The rate is set for a number of miles and then divided by the miles driven in a certain period. On average, this comes out to between 2 and 10 cents per mile.

What are The Benefits? Is Pay-Per-Mile an Inexpensive Car Insurance Option?

According to a UC Berkeley study, the changes in driving habits from pay-per-mile would mean driving would be cut by 9%, with insurance savings of up to $8 billion every year and a huge reduction in road congestion.

Although high-mileage drivers may end up paying more, what this system guarantees is that low mileage drivers will not subsidize them, according to a study by MSN. It is also a more accurate way of judging the accident likelihood of drivers, since driving more increases your risk of getting into an accident.

Any Downsides?

After years of efforts to make this available in more areas, it’s still not available in many states.

Before you get insurance squared away, get online quotes for the vehicles you want. BuyingAdvice.com fetches quotes from you local dealers, saving you time and money. Our service is completely free. Click here to learn more.


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