Car insurance companies are starting to offer a new way to offering price insurance to customers that would now figure in based on their vehicle usage. Pay-per-mile insurance is a new trend that bases your payment on how much you drive. The largest company in America offering pay-per-mile insurance is Metromile. However, several Canadian insurance companies are beginning to offer the new pricing scheme, too, but how much will it cost in the end?
How Does Pay-Per-Mile Work
Each insurance company differs in how they implement their pricing scheme for pay-per-mile insurance. Generally, users pay a flat fee, and then each mile costs a few cents added to your bill. Driving 200 miles a month at a rate of $0.05 per mile would add $10 to the cost of the base rate. Base rate fees start at around $20 and up, depending on the company. A small device is attached to your car that allows the insurance company to monitor your driving and how much you’re driving. Think of it as an electricity meter for your car that knows how much you’ve been using it. Pay-per-mile can be one of the best ways to ensure you get the best car insurance rates if you are not a frequent driver. Since it is based on the amount of time you spend on the road, you’re automatically saving money.
Should You Switch to Pay-Per-Mile?
To help understand whether you would save money by switching to a pay-per-mile insurance plan, you should know how much you drive per year. This style of insurance plan is not recommended for anyone who drives more than the national average of 12,000 miles per year. Anything above that rate will make your insurance more expensive than traditional insurance payments for true pay-per-mile services like Metromile. Esurance also offers a pay-per-mile insurance plan in Oregon with plans to expand to other states soon. Some insurance companies may require a smaller mile-cap to see lower prices. That mile count could be as low as 7,500 miles in the United States. In Canada, CAA Insurance company offers Ontario drivers pay-per-mile insurance aimed at motorists who spend less than 9,000 km per year on the road. These programs are relatively new in the United States and Canada, so they are not available in all states and provinces.
Don’t underestimate your own driving habits. If you’re unsure, consider tracking how much you drive in an average week and then multiply that mile count by 52 and add 20%. You might realize that your driving habits place you above average on the national scale. If you love to drive, then pay-per-mile insurance is probably not for you. But for motorists who only use their vehicles as job transportation, this can be a godsend for saving money. Chat with your insurance agent to see if they offer pay-per-mile in your state or province. Metromile is expanding in the United States and several Canadian insurance companies have invested. It’s likely we’ll see the leading competitor in pay-per-mile insurance headed to Canada soon.
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