2021-07-15
One inevitable cost of owning an automobile is insurance. Except for New Hampshire, every state requires motorists to have at least basic liability insurance. Depending on age, driving history, vehicle type, and coverage plan, insurance premiums vary greatly, and can be very expensive. For people who do not drive many miles each year, owning a vehicle is not very cost effective, due to the high insurance rates. Fortunately, some major insurance providers now offer plans based on miles driven, which helps lower the cost of coverage.
Known as pay-per-mile insurance, this type of coverage plan has rates based mainly on miles driven. Each individual insurance company has their own name for these policies, but the concept is the same. When a driver signs up for pay-per-mile insurance, they are provided with a small device that plugs into their vehicle's diagnostic port. The device keeps track of the vehicle’s odometer, and communicates the data to the insurance provider. They are then able to charge customers for the miles driven in the billing period.
Pay-per-mile insurance is not for everyone. Individuals driving over 10,000 miles a year generally do not save money with mileage-based coverage. Additionally, most vehicles built before the 1996 model year do not have the OBD-II diagnostic plug required for the odometer tracking device. Those who own cars from 1995 and earlier are not able to benefit from these policies. It is also worth noting that pay-per-mile policies are not available in all 50 states.
Even though pay-per-mile plans do increase in cost as more miles are driven, most policies have a daily limit, meaning the insurance company can only charge for so many miles per day. Depending on the provider, this maximum can be anywhere from 150 to 250 miles. While it seems like a lot for most drivers, those who take infrequent road trips need not worry about the cost of these policies. For example, they will be charged the same amount if they drive 250 or 500 miles in one day.
Looking into a pay-per-mile insurance policy is a wise choice for individuals who do not drive many miles per year. High premiums can be avoided for those who live in a state where such coverage is offered. While signing up may require switching insurance providers, the significant savings will come as a great benefit.
