There are different types of auto insurance plans in the market. Since vehicle insurance is compulsory in most US states if you own a vehicle, it is important to find low-cost and cheapest auto insurance to suit your budget.
Driving less often makes this even more important. If you drive it occasionally, there is no point in paying hundreds and thousands as car insurance every year. After all, you can’t pay more insurance when you may not even claim it.
At the same time, auto insurance is a must. That’s where a Pay-Per-Mile insurance plan can help lower your insurance amount. A Pay-Per-Mile policy determines the insurance amount based on the miles you are likely to drive that year. Insurance companies use artificial intelligence algorithms to determine the average miles you’ll travel in a year. This is done based on your past records.
So how is Pay-Per-Mile different from traditional auto insurance? Let’s find out.
What is Pay-Per-Mile Insurance?
Pay-Per-Mile auto insurance is also known as mileage-based insurance and includes two elements- base rate (fixed) and a fee per mile (variable). This reduces the total car insurance amount by a substantial margin. You can save as much as 40% on the insurance amount by choosing Pay-Per-Mile instead of full traditional car insurance.
Is it the same for everyone? No.
Let’s explain. The base rate is calculated similarly to traditional insurance. The car’s make, model, year, driving record, credit score, etc., are considered to calculate the base rate. However, the variable amount is based on how much you drive. Each mile has a few cents as a fee (which adds up to tens, hundreds, or thousands depending on your travel).
For example, the base rate comes up to $25 per month. Each mile is charged at 5 cents, and you drive 300 miles that month. This comes to $15. So, you pay a total of $40 (25+15) as your car insurance for the month.
Here, the fee per mile is not fixed or the same for every driver. It depends on other factors like your age, driving record, etc., (the same aspects used to calculate the base rate). A person with a good driving record and fewer travels will get cheap auto insurance and save money.
What Is Traditional Auto Insurance?
Traditional auto/ vehicle insurance is usually liability coverage or full coverage with add-ons. Liability coverage or casualty insurance is where the insured driver is responsible for the damages incurred by the victim/other parties. It covers bodily injury and property damage.
Full coverage insurance has more aspects like collision coverage, towing payments, lease payoff, underinsured or uninsured motorist coverage, comprehensive coverage, personal property coverage, and so on.
Either insurance plan will amount to thousands of dollars per year. This can easily double if you own a high-end vehicle like a luxury or sports car.
Insurance bundles are also part of traditional insurance. A bundle is where two or more insurance policies are combined to lower the total premium amount. The bundles depend on what the insurer wants to offer.
Pay-Per-Mile vs. Traditional Auto Insurance
- Tracking Miles
Pay-Per-Mile insurance relies on the number of miles you travel. The insurance companies will provide a device to install in your vehicle. However, make sure the device is compatible with your car. There’s no need for such attachments in traditional auto insurance.
- Multiple Vehicle Owners
Pay-Per-Miles is convenient when you own two or more cars and use only either of them at once. That way, you pay only for the mileage you drive in each car. This plan is also helpful when you use public transport more, stay out of town often, work from home, or prefer to walk.
Contact your local insurance companies to confirm they provide Pay-Per-Miles insurance. Unlike traditional insurance, this plan is not yet available in all parts of the US.
- Daily Max Limit
Insurers allow you to cap the daily miles for local and highway travel. This keeps the insurance amount under control. While there is no such option in traditional insurance, you don’t have to worry about how much you travel in your vehicle. The Pay-Per-Mile plan is suitable only if you don’t use your car much.
- Billing Options
Traditional insurance is a prepaid model. Pay-Per-miles can be prepaid or postpaid, depending on the insurer. The insurance bill can be generated at the end of the month or the amount can be deducted from what you pay at the beginning of the month.
Choosing the right insurance plan requires research. Talk to insurance agents in your region and get quotes from multiple insurers for comparison. The aurora car insurance provides the cheapest and low-cost auto insurance by helping you choose the correct plan for your requirements.