Insurance is one of the biggest expenses associated with car ownership. With average annual car insurance costs of around $1,000, it’s clear that choosing what type of coverage they purchase is a decision that can have significant financial implications for most car owners. Insurance by the mile is one of the options that can help some drivers cut insurance costs substantially.
Pay-As-You-Drive
Insurance by the mile, or pay-as-you-drive insurance, has its pros and cons. Generally speaking, pay-per-mile insurance is more suitable for people who don’t drive that much, and often use alternative modes of transportation, such as riding a bicycle or walking, or use public transportation. People who drive under 7,000-8,000 miles per year are usually eligible for this type of insurance.
Lower Premiums
Those who don’t drive too often, can save a lot of money by getting pay-per-mile insurance, instead of regular insurance that involves paying premiums that are exactly the same each month, regardless of how much a person drives over the course of the month. Pay-as-you-drive insurance policies involve significantly lower rates than standard insurance policies, mainly because driving less translates into decreased risk of accidents, meaning those who drive less frequently file less insurance claims, as well.
Helping Increase Teen Driver Safety
Another advantage of pay-as-you-drive insurance is the fact that it allows people to keep track of how many miles they drive each month, which can come in handy to those who want to track the mileage on the car used by their teenage kids or to those who use their vehicles for business purposes. On top of this, people who purchase insurance by the mile, and have teenage kids driving their cars, can get an insight into their kids’ driving habits, so that they can make sure they don’t engage in risky driving behaviors.
A pay per mile insurance policy involves having a device that monitors how a person drives, the way they brake and accelerate, installed in a person’s car, which can help parents find out whether their kids are practicing safe driving habits and avoid aggressive driving.
Insurance companies that offer insurance by the mile say that it can save drivers up to 50% on auto insurance, when compared to standard insurance.
Numerous Restrictions
As far as drawbacks are concerned, pay-as-you-drive insurance can turn out to be more expensive in some specific situations. For instance, if a person who has purchased pay per mile insurance drives at night frequently, or is prone to speeding, their insurance company might raise their rates. Also, it can be more expensive for those who exceed the mileage limit that is stated in the policy, which is almost always under 10,000 miles.
Possible Invasion of Privacy
Finally, the fact that a person’s driving is being tracked might be considered to be a disadvantage, as well. Some people see it as invasion of privacy, given that the devices installed in a person’s car can collect their location information. This is not the type of information that all drivers want to share with their insurance companies, so it’s a factor that needs to be considered before deciding whether or not to purchase insurance by the mile.