Glossary
Pay-per-mile insurance, defined
An auto policy priced on how far the car is driven, with a small fixed monthly base charge plus a rate for each unit of distance recorded by a plug-in device or the vehicle's own connection. Coverage is the same as a standard policy; only the premium formula changes.
In practice
It suits people who drive little: remote workers, retirees, a second car that mostly sits, a city dweller who walks and takes transit. The break-even against a conventional policy depends on the base rate and the distance rate, and a long road trip in a given month raises that month's bill, though some carriers cap the daily distance charged. The device or app also records location and time, which some drivers object to. Rates still reflect the driver's record, the car and the address; the distance is one factor. Availability varies by state and carrier. A driver whose habits change, such as taking a job with a commute, should re-check the arithmetic rather than let the bill climb.
A worked example
Suppose a carrier charges a $30 monthly base and 6 cents a mile. A retiree who drives 400 miles a month pays $54; her conventional quote was $110. Suppose her daughter, who drives 1,500 miles a month, priced the same policy: $120, against a conventional quote of $105, so the arrangement suits one and not the other. Hypothetical figures.
Applies to: Auto Insurance