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Have you considered Pay-Per-Mile Car Insurance?

  Sanjiv Gupta CPA  Published 
Have you considered Pay-Per-Mile Car Insurance?

Car Insurance companies are giving another option to their customers. Some carriers are changing their traditional plans and now offer Pay-Per-Mile insurance. The new system allows drivers to be charged for the exact amount of miles they drive instead of providing them with coverage for a determined distance or time period.

It is like leasing a car, but without having to pay for a down payment or monthly installments. You only pay for the miles you drive and if you want to stop driving all you need is to let the insurance company know; you will not be billed after that point.

Some drivers like this new concept because they think it provides them with more freedom, while others hate it because they feel like they are being ripped off by the meter.

Now it is your turn to vote on whether or not this new system of payment is a good idea. Would you prefer having more freedom and control over your insurance plan or would you rather have a fixed rate per year?

To use this new system of car Insurance, drivers must agree to pay a rate of 0.10 to 0.17 cents per mile, depending on their car habits. About 20 million motorists are covered under this new system and the number is expected to keep growing as more companies offer the Pay-Per-Mile plan.

People that drive less than 7,500 miles a year save an average of ten percent in insurance costs. Also, by driving less, drivers can expect to receive a discount in their insurance rates.

The main disadvantage of the new system is the possibility of high monthly bills in case you decide to drive more than usual. However, this problem can be solved if you use some sort of tracking system that takes into account when and where you drive.

Your insurance premiums are determined by your driving behavior.  Insurance companies provide will ask you to install a app on your smart phone to learn more about you & track your driving habits.

Commonly tracked driving behaviors are:

  • How often you drive
  • How far you drive
  • When and where you drive. 
  • Acceleration and Speed
  • Breaks

While this new system could be a good idea for some people, others say that it might not work because you cannot really control the number of miles you drive. Driving habits are usually hard to regulate unless you have someone monitoring your mileage all the time.

You could also have to pay higher rates if you are involved in an accident or receive speeding tickets.

Many Insurance companies offer telematics insurance.  Most common providers are:

  • All State 
  • Nationwide
  • Safeco
  • State Farm

What do you think? Would it be a good idea to switch to Pay-Per-Mile car Insurance? Is this plan the future of Car Insurance or only another way for companies to squeeze money out of you?