Drivers who do not cover a ton of kilometers on their odometers have what is called a “good problem”. By driving fewer miles, you reduce wear and tear on your vehicle, save money at the gas pump, and reduce the risk of car accidents.

These are all good things. But you still pay for auto insurance that doesn’t fully reward you for your minimum driving.

Mileage insurance is specially designed so that you can control your monthly auto insurance bill based on how much you drive.

How kilometer insurance works

“There is a direct relationship to the miles people travel and the likelihood of them having an accident,” says Rick Chen, spokesperson for pay-per-kilometer insurance company Metromile. Even if you don’t drive a lot, others do. And that can impact the rate you pay, as an overall increase in accidents, repair costs, and / or injury bills will increase rates for everyone.

“Insurers need to cover these types of cases in their pricing,” Chen explains. “They extend it to all their customers.”

That said, insurers do offer discounts for low mileage, but the discount usually applies if your mileage is below a single threshold, say 8,000 miles per year.

With pay-per-kilometer insurance, you get the same types of coverage as with traditional auto insurance, says Teresa Scharn, associate vice president of personal insurance product development at Nationwide Insurance. This includes auto liability insurance, collision and comprehensive coverage, uninsured motorist coverage, and roadside assistance. But you have more control over the rate you pay because it’s based, in part, on the actual miles you drive.

Pay-per-kilometer insurance programs charge a daily or monthly base rate based on factors similar to those used when setting rates for a traditional insurance policy, such as your age, driving record , your vehicle, your location and your credit. The base rate therefore varies from person to person.

Then there is a charge per mile. The rate per mile also varies from person to person depending on the factors used to set the base rate, Scharn explains. And the amount you pay will vary from month to month depending on the number of kilometers driven. The monthly bill is usually based on the number of kilometers driven in the previous month.

There may also be discounts available. For example, in California, Metromile offers discounts for good drivers, experienced drivers, insuring more than one car, and having a vehicle recovery facility.

Here’s an example of what a pay per mile plan might look like: You pay a monthly base rate of $ 29 per month and a per mile rate of 5 cents. If you travel 500 miles per month, you would pay a total of $ 54 for that month (base rate of $ 29 plus 500 miles x $ 0.05 = $ 54).

Insurance per kilometer should not be confused with usage-based auto insurance, which emphasizes safe driving behaviors, such as braking and speeding, and less on the kilometers actually traveled.

How miles are measured

For pay-per-kilometer programs to work, insurance companies must have an accurate way to measure your kilometers. Most use a small device that plugs into a port near the steering wheel (called an OBD-II). You may need to have a 1996 or newer model year vehicle for the device to work, depending on the insurer. And some devices, like Nationwide’s, might be incompatible with hybrid vehicles.

Some devices can detect the location, speed, time of day you are driving, and how safe you are driving. This additional information will usually not have a negative impact on your rate, but it may result in discounts. For example, Nationwide’s SmartMiles offers an additional 10% reduction on your premium after six months for safe driving, says Scharn.

Chen says the Metromile device tracks location in addition to mileage, but the location service may be disabled for privacy reasons. If you keep it, you can use the Metromile app to track and plan trips, track your gas expenses per trip, and locate your car in the event of theft. Metromile offers a feature in Arizona and Oregon that will monitor driving habits and allow safe drivers to get a lower rate.

If you don’t like the idea of ​​installing a device in your car to track your mileage, another option is Mile Auto, which requires policyholders to take a photo of their odometer once a month to report mileage.

How much does Pay-Per-Mile insurance cost

Insurance rates per kilometer vary from company to company. And the rates will vary from driver to driver, as they would with traditional auto insurance.

For example, Scharn says that the base rate for the Nationwide SmartMiles program is about 30% of what the premium for a traditional Nationwide auto insurance policy would be. So if your annual premium for a traditional policy was $ 1,000, the base rate for SmartMiles could be around $ 300 for you. The average rate per mile is 6.5 cents but can range from 2 cents to 10 cents, according to Scharn.

Liberty Mutual’s ByMile and Mile Auto say customers save up to 40% off their standard insurance rates. Metromile says its customers save an average of $ 741 per year. The website says the base monthly rate starts at $ 29, but Chen says Metromile has customers who pay less than that. The average rate per mile is 5 cents to 7 cents, according to Chen.

Unlike other pay per mile insurance programs, Allstate’s Milewise charges a daily rate and a per mile rate. You must link a credit or debit card to your account and charges are billed after the trip is completed.

Some of these programs have caps on the miles you pay per day. So if you take a long road trip, you won’t be too affected. For example, Metromile and Nationwide will not charge more than 250 miles traveled in a day, and Liberty Mutual will not charge more than 150 miles traveled in a day.

Who can benefit from kilometer insurance?

Obviously, a person who doesn’t drive a lot could save money by opting for kilometer insurance. But what constitutes “not driving a lot”?

On average, Americans drive 13,476 miles per year, according to the Federal Highway Administration. You’d have to drive less than that to save money with kilometer insurance, Chen says.

For example, if you were billed a base rate of $ 29 per month, a rate per mile of 5 cents, and you were driving 500 miles per month, you would pay a total of $ 54 per month for pay-per-car insurance. -mile. However, if you drive as much as the average American each month (1,123 miles), you would pay around $ 85 per month.

When considering how much you drive, mistakenly disregard how long you will be driving, especially if you spend time sitting in congested traffic.

“This is not the time you spend in your car. It’s the distance you travel, ”says Chen. “For most people, they just don’t drive much at all.”

Owners of cars that do not record many kilometers may include:

• People who take public transport to work and only drive on weekends
• People who work from home and do not commute
• People with car rentals that have strict mileage restrictions
• College students who live on campus
• Retirees who rarely drive

A mileage insurance plan can also be attractive to drivers who want to save money based on actual mileage driven compared to behavior-based driving plans like usage-based auto insurance.

Try it before you buy it

If you are not sure whether the payment per mile car insurance is for you, keep track of your miles before committing to a plan. Metromile recently launched its RideAlong app, which counts how many miles you ride for 17 days, then calculates what your fares and monthly bill would be if you were a Metromile customer.

Another option is to download a third-party mileage tracker app to your smartphone and track your miles. There are free and paid apps that run in the background and log your kilometers driven. This could be a good option for tracking miles if you don’t have consistent daily driving habits like commuting to work or school.

How to get insurance by the kilometer

Allstate, Metromile, Mile Auto, and Nationwide are the handful of companies that offer kilometer insurance. With all four, you can get quotes online and get a better idea of ​​how much you would pay for coverage based on miles driven.

Not all pay-per-kilometer plans may be available nationwide.

Before switching to a pay-per-kilometer insurance policy, get quotes from companies that offer a program in your state. Then check your current policy to see if you can get the same level of coverage (or more) with a pay-per-kilometer program at a lower cost.

Pay-Per-Mile Auto Insurance FAQs