If you only drive occasionally, paying for a traditional car insurance policy might seem like you’re overspending. A pay as you drive car insurance policy might be an option if you spend minimal time on the road.
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Pay as you go car insurance is a specialized policy designed for drivers who aren’t on the road every day. Also called pay per mile car insurance, this type of insurance can be more affordable for drivers who don’t chalk up high mileage each month or year.
Pay as you go car insurance policies use telematics, often through a smartphone app or a device installed in your car, to monitor how much you drive each day or month. Then, you pay a base monthly rate for your insurance, plus a per-mile rate for your total mileage driven that month.
For example, let’s say your base rate is $30 and you have a per-mile rate of $0.07 per mile. If you drive 1,000 miles in a month, you would pay your $30 base rate plus $70 in mileage for a total of $100 for the month. Even if you don’t drive at all during the month, you will still pay your base rate.
A pay as you go insurance policy may make financial sense for drivers who consistently spend minimal time on the road. College students who don’t commute, retirees, people who work from home, and people who mainly rely on public transportation may all be able to save money with a per-mile insurance policy.
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You can buy a pay as you go car insurance policy with the same standard coverage you would get with a traditional car insurance policy. You can also add on coverages like comprehensive and collision insurance for more protection. However, as you add on more coverages, your base monthly rate will increase.
Just like a car insurance company would calculate your insurance premium based on factors like your vehicle’s type and value, your driving record, and your state, insurance companies use those same factors to calculate your base monthly rate for pay as you go insurance.
While you’ll always pay your base rate, even if you don’t drive at all during the month, your actual monthly car insurance costs will depend on how much you drive. You can keep your rates low by minimizing your mileage per day and per month. You’ll also have the benefit of not having to pay for the miles that you don’t drive, which can make this type of car insurance policy an appealing option if you don’t drive far or often.
You can get free, personalized pay as you go car insurance quotes online today to start exploring these insurance programs and to get a sense of what your base rate and per-mile cost might be.
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Paige Cerulli Paige Cerulli is a freelance content writer and journalist who specializes in personal finance topics. She graduated from Westfield State University and brings more than a decade of professional writing experience to the ConsumerCoverage team. Paige’s work has appeared in outlets including USA Today, Business Insider, and more.
