During the pandemic and at other times, if you drive very little, consider pay-per-mile car insurance to lower your premium. According to the U.S. Department of Transportation, the average American drives about 13,500 miles a year. Insurance companies estimate that a person would likely benefit from pay-per-mile insurance program if they drive less than 8,000 miles annually.
Pay-per-mile insurance may be appropriate for people who work from home, are in college, regularly use public transportation, or who have a second vehicle that is rarely used. This coverage has a base rate, which is determined similar to traditional auto insurance. After that, the per-mile rate is added on. High mileage, aggressive driving, and overnight driving can result in higher auto insurance rates.
Usage-based insurance programs use telematic technology with an app or in-car device to track your driving. Instead of in-car monitoring systems, some companies require that you submit a photo of your odometer each month.
Another type of usage-based insurance is pay-as-you-drive with rates based on driving habits. With this coverage, rates may increase as a result of bad driving habits. Behaviors that are monitored include hard braking, acceleration and speed, the time of day you drive, mileage, and cellphone use.
For additional information on pay-per-mile car insurance, click here
Teaching Suggestions
- Have students talk with others to learn about their current auto insurance coverage and costs.
- Have students conduct online research for pay-per-mile and pay-as-you-drive auto insurance to obtain additional information on the features, benefits, and drawbacks of these coverages.
Discussion Questions
- What features of pay-per-mile car insurance might be appropriate for you or people you know?
- How might a person reduce the amount paid for auto insurance?
Melissa Hart
Focus on Personal Finance, 7e 