If you’re accustomed to driving less than 10,000 miles per year and you like a hands-on insurance experience where you can see what you’re paying for, then pay-per-mile insurance might be right up your alley.
Pay-per-mile insurance is a full coverage variety of insurance where the less you drive, the less you pay.
The basic idea with pay-per-mile insurance is that you plug a dongle into your vehicle’s OBDII port (1996 vehicles and newer) and it records your daily mileage. As a general rule, how you drive is not being assessed here. It’s how much you drive that’s the key.
Take a look at these pay-per-mile insurance providers
There are three main competitors in the market: Metromile, Milewise and Esurance Pay Per Mile. But because the latter two are both owned by Allstate, let’s say that pay-per-mile insurance is effectively a two-horse race!
Keeping with the theme of twos, the pay-per-mile business model has you paying two rates: A daily base rate and a second per-mile rate.
If you’re wondering how paying two rates instead of just one — as you would with a standard unlimited-mileage insurance policy — could possibly be cheaper, the answer is simple.
The daily base rate can be as low as $1 a day in some cases and the per-mile rate is often just pennies per miles that you drive.
Here’s a look at the main pay-per-mile insurance companies…
With Milewise, you put money on deposit via a credit card and each day’s miles are deducted from your balance. When your balance is low enough, your account will automatically replenish by billing your credit card on file.
If there’s ever a time when you don’t drive for the day, you save money. On days like those, you’ll find that only the daily base rate is deducted from your account — not the per-mile rate.
Milewise says it sets both the base rate and the per-mile rate by looking at your age, vehicle type and driver history, much like the traditional auto insurance industry.
As for the mechanics of how the service works, you just plug the dongle that the insurer provides into your vehicle. It records your miles, and then you can monitor your daily trips through a mobile app on your phone.
Milewise breaks from the traditional pay-per-mile insurance model by also collecting your speed, the time of day you drive, reports of hard braking and your location. That makes it unique among its competitors.
Let’s say you only drive 96 miles or less a week. Milewise’s calculator shows that you’ll save 20% per week compared to Allstate’s traditional auto insurance rate.
The less you drive, the more you’ll save!
And on the other end of the spectrum, the meter stops running once you hit 150 miles per day. So there’s no per-mile charge for each additional mile you drive beyond 150.
So far, Milewise is only being offered in New Jersey, Oregon and Texas. Parent company Allstate promises expansion to other states soon.
Esurance Pay Per Mile
Also part of the Allstate family, Esurance Pay Per Mile sets your base rate and the per-mile rate by looking at your age, gender, driving history and insurance history, as well as your car’s make, model and year, among other factors.
Esurance requires a down payment that covers a percent of your total six-month base cost. That’s the first of eight payments you’ll make over six months.
According to the website, the other seven payments are comprised of the six monthly service bills and one final bill you receive after your six-month term ends. That final bill accounts for your last days of driving.
Like its competitors, Esurance Pay Per Mile charges you a restocking fee if you cancel their service and don’t return the dongle.
But they also take it one step further and charge you a straight-up cancellation fee of $50. That fee can be waived if you switch to one of Esurance’s standard unlimited-mileage policies.
Perhaps the biggest drawback with Esurance Pay Per Mile is that it has the most limited service area of all three competitors.
It’s only available in Oregon, which naturally prevents most Americans from taking advantage of this service. More states will supposedly be added soon.
Metromile is pretty much the leader in pay-per-mile insurance. With operations in seven states, it has the largest geographic reach by far.
The service is currently available in California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia and Washington.
By now, you know the drill: Plug the dongle into your 1996 or newer vehicle and drive as you normally would.
If you go for a particularly long drive, Metromile is a little less generous with when it stops the meter. While its competitor Milewise gives you every mile over 150 free, Metromile has a higher 250 miles/day cap — except in New Jersey, where it remains a 150 miles/day cap.
If you don’t like the Metromile service, just cancel and return the dongle. There are no fees to cancel, but you will be charged $100 if you fail to return the Metromile dongle in 30 business days.
Don’t be confused by the dongle!
Because all pay-per-mile insurers use a dongle to track your miles, it’s easy to confuse them with other services like Progressive Snapshot, State Farm’s Drive Safe and Save and Drivewise from Allstate that also do the same thing.
But Progressive, State Farm and Drivewise all factor how well you drive into your rate; true pay-mile-insurers — not accounting for Milewise’s deviation as described above — do not.
So Snapshot, Drive Safe and Save and Drivewise are relying mostly on the quality of your driving to set your rate, while the quantity is less important, even though it still factors in.
In practice, that means Snapshot, Drive Safe and Save and Drivewise want to see three things:
- That you maintain safe speeds (generally under 80 miles per hour)
- That you don’t brake too hard i.e. that you minimize abrupt stops and jackrabbit starts where you zoom off when the light turns green
- That you don’t drive during dangerous times of the day (generally 12 am-4 am)
Pay-per-mile insurance in its truest form doesn’t take any of that into account.
Pay-per-mile insurance hasn’t gained much traction in the industry so far. That’s likely because it’s only available in a handful of states.
So geography will probably be the biggest determining factor in deciding which one of these services is right for you — if you even have one operating in your state.
And, of course, it goes without saying that if you’re a super-commuter, pay-per-mile insurance is definitely not for you!