Switching your auto insurance when you use your car less can be a real money-saver.
- Switching to a pay-per-mile car insurance can save you more than $1,000 per year in auto insurance premiums.
- Pay-per-mile auto insurance offers the same coverage as a traditional policy, but your premiums are based on the number of miles you drive.
- Pay-per-mile auto insurance is best for low-mileage drivers.
The number of people working from home has increased dramatically since the pandemic. Even with many workers returning to the office, 92% of workers expect to work from home at least one day per week and 80% expect to work from home at least three days per week. The national average for auto insurance premiums is $2,875 per year. By converting your auto insurance to a pay-per-mile policy, you can potentially save $1,000 or more per year.
What is pay-per-mile car insurance?
Pay-per-mile car insurance is for low-mileage drivers. It offers the same coverage as a traditional policy but your monthly premium is based on the number of miles you drive. Drivers have more control over their auto insurance costs compared to a traditional policy.
Insurance companies track the number of miles you drive either through telematics or by taking a picture of your odometer and sending it to the insurer. Telematics is a technology that monitors vehicles in real time through GPS. It can be built into a car like a Tesla, or you can plug a device into your car’s diagnostic dashboard.
How much does pay-per-mile car insurance cost?
Pay-per-mile auto insurance premiums vary based on the insurance company and the driver. Your rate typically consists of two parts: a base flat monthly rate and a variable rate (cost per mile). The base rate is based on factors such as the driver’s gender, age, location, and driving history. The variable portion of the rate is based on actual miles driven. Your monthly premium will vary month to month.
For example, a 35-year-old single male with a good driving record may pay a $60 base rate per month and $0.07 per mile driven that month. If he drives 500 miles in one month, his monthly premium will be $95 ($60 base + $35 variable). This is a 60% savings from the average premium of $240 a month. Assuming the driver continues to drive 500 miles per month, over one year that equals a savings of over $1,700.
Should you get a pay-per-mile insurance policy?
This type of car insurance is best for low-mileage drivers — those who work from or close to home, use public transportation, retirees who don’t drive often, college students who don’t commute, and drivers with multiple vehicles. If you drive a high number of miles and have a long commute, then a traditional policy may be best for you. After getting your quote from the insurance company, compare rates on both a traditional and pay-per-mile policy to see which one is a lower price.
Pay-per-mile has become more popular as insurance companies can now offer more targeted and cheaper policies to meet driver demands. Even with many workers returning to the office, many drivers are driving less than they used to. If you don’t drive much, you may be overpaying for car insurance. Switching to an auto insurance policy that is based on how many miles you drive can potentially save you $1,000 or more per year.
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