Pay-by-the-Mile Auto Insurance Options

Since I don't drive much, I like the idea of auto insurance that's usage based. This is also known as pay-by-the-mile or pay-as-you-drive insurance programs. Incentives to drive less is not only good for our wallets, but also good for the environment.

Since I don't drive much, I like the idea of auto insurance that's usage based. This is known as pay-by-the-mile or pay-as-you-drive auto insurance. Incentives to drive less is not only good for our wallets, but also good for the environment.

Recent news of a partnership between OnStar and GMAC Insurance sparked my interest to research what options are available. Here are three programs that I've found.

Low Mileage Discount Program is the new GMAC Insurance program for OnStar customers. The program confirms your mileage based on your vehicle diagnostics reports. An example discount provided by the site is 39% for those who drive 5,000 miles or less per year.

MyRate Program is an auto insurance program developed by Progressive Insurance. Instead of OnStar it uses an on-board telematic device that plugs into a car's OnBoard Diagnostic port. The device wirelessly sends data about when, how much and how you drive your car to help determine your rate at renewal. The program is currently only available in Alabama, Kentucky, Louisiana, Michigan, Minnesota, Maryland, New Jersey and Oregon.

MileMeter is a new auto insurance company that is based on pay-by-the-mile insurance. Unlike the other two, MileMeter does not use a mileage tracking device. Instead it's based on what you report. In addition, they receive odometer readings from vehicle emission, maintenance, and registration databases. The policy costs are quoted in cents per mile. You may purchase between 1,000 and 6,000 miles of coverage for a 6-month period and pay in full at the time of purchase. You may purchase more miles as you need them. They currently only provide insurance policies in Texas

As someone who lives in Austin and doesn't have OnStar, MileMeter was my only option. So I tried MileMeter's online quote service. One thing I liked about the quote process is that they don't ask for your social security number since they don't use credit scoring.

One negative is that they didn't provide many coverage options. I wasn't able to match the coverages that I currently have with State Farm. I selected the maximum liability coverage, collision/comprehensive with a $500 deductible and Uninsured/Underinsured coverage. They gave me a quote of 8.74 cents per mile for a 6-month term. This comes out to $87 for 1,000 miles to $524 for 6,000 miles. I think I could get by with 3,000 miles which results in a policy cost of $262 for a 6-month term which is less than what I'm currently paying for my State Farm policy. However, as I mentioned, the limits are different so it's not a perfect comparison.

I hope we'll see more auto insurance companies offering these pay-by-the-mile plans. State Farm does offer low mileage discounts, but the maximum discount is only 18%. I want pay-by-the-mile plans with discounts proportional to the miles I drive.

Ken Tumin
Ken Tumin: Ken is the author of the BankDeals blog and has provided this article to BestCashCow.

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  • Sam Cass

    December 10, 2008

    This makes sense. I drive less than 1,000 miles per year in my car and would benefit from a program like this. I'll have to see if these programs are available nationally.

  • ktexas

    December 10, 2008

    I thought I didn't drive much. Hopefully, MileMeter and others like it will be able to spread out to other states. From MileMeter's FAQ, it appears it's not easy to get approval in many states. Below is from their FAQ:

    contact your State Insurance Department and local State Representatives to ask for MileMeter and by-the-mile insurance in your state: your elected officials and appointed regulators have the ability to help in many ways

  • Randall

    March 19, 2009

    I recently purchased milemeter auto insurance here in Texas at a cost of $32.00 for 6 months ( 3.2 cents /mile minimum coverage for 1000 miles )on an old truck I drive on weekends. What a deal. It is easy to immediately print the policy and insurance card. I hope milemeter can expand to other states..

  • ktexas

    April 11, 2009

    $32 for 6 months is a great deal. This auto insurance by the mile seems like a perfect fit for those second cars/trucks that are only driven occasionally.

  • formermilemetercustomer

    September 15, 2011

    Mile meter was fantastic for my second vehicle that only gets driven about 500 miles/yr. That was until they raised the minimum mileage to 4000 miles per 6 mo. Which leaves me trying to find somewhere else who can insure my low usage car for a proportional price. Btw, milemeter will not offer full coverage for older vehicles.

  • Boudicca

    February 18, 2012

    I was thrilled when I acquired milemeter coverage; however, I ended up being covered for 1 year only as they changed their plans to the 4000 miles for 6 months. I ended up with Geico $250 for 6 months. I only drive a couple hundred miles per year, so that is a waste of money. I checked milemeter again hoping things changed in the last 1-1/2 years. They officially folded 12/2011. I am not surprised. I live in Texas where the natives enjoy driving drunk. I know I am probably over insured with Geico because of that, but I would rather be over insured than under insured. The only thing cheaper is just not to own a car at all, and my Saturn looks to be the last car I ever intend to purchase after being shafted by Government Motors.

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