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Pay-as-you-go car insurance
Only pay for how much and how well you drive with pay-per-mile car insurance.
Updated . What changed?
Why should a driver with a five-minute commute pay the same as a driver with a two-hour commute? If you want great car insurance but don’t drive that many miles each year, compare pay-as-you-go car insurance, also known as pay-per-mile or usage-based policies. Another similar option is telematics car insurance, which tracks your driving habits and sets a rate based on your safety skills.
What's in this guide?
- Compare pay-as-you-go car insurance
- Which top brands offer pay-as-you-go car insurance?
- How much can I save with pay-as-you-go car insurance?
- Is pay-as-you-go car insurance right for me?
- Sign up for pay-as-you-go insurance in 6 steps
- Ask an expert: How does telematics help me save on insurance?
- How does pay-as-you-go car insurance work?
- Pros and cons of pay-as-you-go car insurance
- What does the insurance company do with my data?
- Black box insurance exclusions
- Bottom line
- Common questions about pay-as-you-go insurance
Compare pay-as-you-go car insurance
Which top brands offer pay-as-you-go car insurance?
You can choose from a variety of pay-as-you-go car insurance policies. Each company’s program differs slightly, so you’ll want to look at how each one works before signing up.
These major companies set a base rate and then charge a few pennies per mile that you drive:
|Company||Potential savings||How it works||Where it’s available|
|Allstate Milewise||Not specified||Allstate takes your premium out of your account each day, based on your miles.||Delaware, District of Columbia, Florida, Idaho, Illinois, Indiana, Maryland, New Jersey, Ohio, Oregon, Texas, Virginia, Washington, and West Virginia|
|Metromile||$611, or up to 50%||Use a plug-in device or Ford Connect to track mileage.||Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, Washington|
|Mile Auto||Up to 40%||Send in a photo of your odometer reading each month.||Georgia, Illinois and Oregon|
|Nationwide SmartMiles||10% for safe driving, more for low mileage||Use a plug-in device for tracking and view your usage online.||33 states and the District of Columbia|
Which brands offer telematics car insurance?
These major companies offer policies that set rates based on your driving skills, called telematics insurance:
|Company||Potential savings||Time until discount||How it works|
|Allstate Drivewise||40% or more in cashback||Every six months||Get cashback every six months and points for finishing safety challenges|
|Liberty Mutual RightTrack||Up to 30%||90 days||After the test drive, return the device to see your final discount.|
|Nationwide SmartRide||Up to 40%||Four to six months||Get a final discount that’s applied at your next renewal.|
|Progressive Snapshot||$145 a year, about 10%||One policy period, usually six months||Get your discount at your next renewal.|
|Root||Up to $900 a year, about 70%||Two to six weeks||You’ll get scored on your driving, then get a discount at the end of the test period.|
|State Farm Drive Safe & Save||Up to 30%||Ongoing||Get an updated discount at each policy renewal.|
How much can I save with pay-as-you-go car insurance?
The amount of money you can save depends on the program you choose and your driving score. A good score can land you a sizable discount, while a bad score might raise premiums. Typically, safe drivers can save whether they go for a standard discount or let an insurer track their mileage and driving habits.
- Pay per mile. You pay less in premiums based on how much you drive. Low-mileage drivers could save up to 70%.
- Telematics. Your insurer tracks your driving habits and mileage and bases premiums on your driving. Safe drivers could save up to 40%.
- Safe driver discount. You pay less the longer you have no at-fault accidents or claims. You could save up to 10% for this discount alone.
Is pay-as-you-go car insurance right for me?
Anyone who drives less than the average person may benefit from the pay-as-you-go or pay per mile system. Similarly, anyone who wants full coverage insurance but doesn’t drive enough to warrant paying full price might consider this option. Drivers who might benefit most:
- Seniors. After you’ve retired, you could drive much less than before and may not need full coverage.
- Students. Pay-as-you-go options work well if you’re a student who leaves your car at home while away at school or who mostly stays on campus.
- City dwellers. If you live in a metropolitan city like New York or San Francisco, you may own a car but leave it parked much of the time.
- High risk drivers. Insurance companies charge higher rates for risky drivers, including drivers under 25 and drivers without perfect credit. But usage-based insurance rates depend on your actual driving, not your demographics.
- Seasonal workers. Seasonal workers like teachers who don’t drive as much during the summer could use pay-as-you-go insurance during the off-season.
- Remote workers. With a 10-foot commute to your home office, you likely don’t drive much except to run errands.
Sign up for pay-as-you-go insurance in 6 steps
Getting started with pay-as-you-go car insurance follows a simple process:
- Review the terms.
- Sign up with the app or policy.
- Receive your black box telematics device from the company in the mail.
- Install it by following the instructions provided.
- Drive as normal.
- Review your driver scorecard to improve your driving and reduce your premiums.
Once the data has settled or become consistent, your driver safety score locks in, and you can send the box back to the insurance company. As such, step six is important for reducing future costs.
Ask an expert: How does telematics help me save on insurance?
CEO, CFP®, MBA, MDiv joelohman.com
One type of lesser known insurance discount is new to most people: allowing the insurance company to put some type of data recorder in your vehicle to monitor your driving habits. If you have safe driving habits or don’t drive all that often then the insurance company will reward you with lower rates.
Virtually every large carrier offers some form of potential telematics discount: GEICO, Allstate, Progressive, Esurance, Liberty Mutual, State Farm, and many others. Additionally, some specialty insurance carriers who offer “pay-by-the-mile” insurance like Metromile use telematics to calculate miles driven and determine rates.
So should you place a device in your car to record and analyze your driving? Privacy advocates are leery of yet one more device tracking us, but you may just determine that savings of 5% or more is well worth what is essentially a “set it and forget it” car insurance discount opportunity. Now just make sure to drive safely, but you already do that regardless, right?
How does pay-as-you-go car insurance work?
Pay-as-you-go car insurance works by using an installed device, your smartphone or built-in service like OnStar to track your mileage. This type of policy charges you a base rate and then a rate per mile, and both rates are based on traditional car insurance factors like your age and driving record.
This type of policy is available through some traditional insurance companies and a few that specialize in it. It’s also known as pay-per-mile insurance, usage-based insurance or black box insurance.
However, some companies are using telematics programs to set a personalized low-mileage discount, so these terms won’t describe each company perfectly.
How does telematics insurance work?
Another similar type of policy is called telematics insurance. This policy uses a device or your smartphone to track your driving habits and set rates accordingly. Behaviors tracked include your braking, acceleration, cornering or the times of day you drive. Then, your insurance company sets your premiums based on how safe you drive.
Nearly all major insurance companies offer a telematics feature so that you can get personalized discounts for driving safely. Telematics is also known as a low-mileage discount or black box insurance.
How is my driving tracked?
All three tracking methods work in a similar way, such as:
- Plug-in device. You install a telematics device in your car called a black box. You may need to remove it every so often, so your insurance company can analyze the behavior tracked.
- Built-in device. Built-in devices like OnStar or SYNC can show your mileage and driving behavior to your insurance company automatically.
- Smartphone app. Instead of using a separate telematics device, you download your company’s app to collect driving data on your phone.
How does a telematics device rate my driving?
Rather than looking at one specific journey, the telematics device looks at many trips combined to discover your driving risk. Not every company uses all the tracked data to determine your rate. Some areas the black box tracks:
- Where you drive
- How often you drive
- Time spent on the road
How can pay-as-you-go car insurance help me save?
A good driver safety score from telematics information will lower your premiums, while a bad score may increase them. However, many drivers save money using this policy because it:
- Replaces no-claims discounts. It can take up to six years to achieve a high no-claims bonus. But if you’re a good driver, black box car insurance can help you achieve the equivalent in one year.
- Reduces risk category. If you fall in a high-risk category like a new or under-25 driver, the black box can prove you’re not a high risk based on your performance. A good black box driver score can offset any higher costs normally charged based on your age, experience or driving record.
- Penalizes less after a claim. You can make claims without worrying about a large premium hike since you won’t have a no-claims bonus to worry about. Your premiums may increase after making claims, but your driver score can stay the same.
- Offers company-independent scoring. If you change insurance companies, some recognize a good driver safety score and offer reduced premiums or higher no-claims bonuses.
- Works for multiple drivers. The black box works for everyone driving that car. If you name several high-risk drivers on the policy, you could get significantly lower premiums compared to traditional insurance if all drivers prove their safe driving with black box data.
- Improves driving safety. Compared to driving with standard insurance, young black box drivers are 20% less likely to suffer a car crash or severe accident. This increased safety could happen because safe drivers opt for black box insurance or because black boxes help people learn from the black box data. Drivers can take immediate action to improve once they see their driving habits.
Pros and cons of pay-as-you-go car insurance
- Lets you get car insurance at a lower price if you drive less and safely
- Means you only pay for the miles you drive
- Quickly achieves the equivalent of a high no-claims discount
- Result in lower premiums for good drivers
- GPS assists recovery if your vehicle is stolen
- Helps you drive more safely and provides feedback
- Provides thorough information and evidence in the event of a dispute
- Ideal for people who drive less or safer than average
- Requires more policy management than standard policies
- Requires you to pay an additional fee to rent the black box
- Monthly premiums can change
- You need to consistently drive safely to get the best value. You can’t set and forget it.
- You may have concerns about data collection and privacy issues.
What does the insurance company do with my data?
The app or device may automatically transmit data back to the insurance company or may require you to take it out and hand it to your insurer to download the data. The insurance company reviews this data and uses it to adjust your premiums.
Your insurance company then uses the black box information to assign you a driver safety score, which shows the kinds of risks you pose to the company. The insurer may give you a score for every trip or assign an adjustable overall score.
This wealth of information is a gold mine for car insurance brands, as it lets them calculate risk much more accurately. Telematics car insurance lets safer drivers pay lower premiums to match their personal driving habits.
What else does the black box do?
In addition to tracking your driving, the black box also records some other important information, including:
- Location. Your insurer may confirm that you store your car overnight in a parking garage or locked location. This personalizes your premium further and confirms the information you have provided.
- Distance driven per year. Mileage makes a difference to your car’s lifespan and the chances of making a claim, but it can be difficult to prove. A black box lets your insurance company understand how far you drive each year and how it compares to other people. It can then adjust your premiums accordingly.
- GPS data. The black box also includes a GPS, which can help police recover the vehicle if it’s stolen or provide further information about your driving.
Is it safe to trust a telematics device with my data?
Some privacy advocates express concerns over the data collected from telematics devices. How do companies use this personal information? If you share these concerns, you can make sure your insurance company offers full disclosure about what happens to the data collected. You’ll find that most insurance companies use measures to safeguard your personal information, rather than selling it.
Another privacy concern is the GPS tracking feature on the device. For some, this sensitive information offers more private information than drivers are comfortable giving. However, some devices let you turn off the GPS feature.
When deciding if usage-based insurance is the route for you, keep in mind that these tracking programs aren’t mandatory. You can opt in and out at any point.
Black box insurance exclusions
The same exclusions apply to black box car insurance that apply to standard car insurance policies. The insurance company may not pay out for:
- Damage caused from illegal activities
- Damage that occurred while the driver was under the influence of alcohol or drugs
- Damage caused by someone else driving your car who isn’t listed on the policy, in some cases
- Damage related to acts of war or biological, radioactive or chemical contamination
- Damage from track or road racing
- Loss because of an unattended and unlocked car in a public place
- Loss of value from depreciation or wear and tear
- Repairs from an unauthorized mechanic or damage from shoddy repairs unless authorized by the insurer
- Damage caused by pets or other domestic animals under your care or responsibility
In addition, insurance companies may refuse to pay out if you showed dishonesty in your dealings with them. Black boxes make some cases of dishonesty easier to spot with clear proof.
Enjoy car insurance premiums customized for your driving with pay-as-you-go car insurance. If you don’t mind transmitting your driving data to your insurance company from a black box, app or built-in device, you could save a bundle on your car insurance.
If you’re not sure whether pay-as-you-go insurance is worth it, compare other car insurance options to find the best policy for you.
Common questions about pay-as-you-go insurance
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