Pay-Per-Mile Auto Insurance

Gas prices are rising every year and many people are trying to find ways to save money on fuel. Despite these money-saving strategies, drivers still need to pay for their full auto insurance.

We all know that there are certain corners that can’t be missed. So we think so! Many auto insurance companies are looking into a new program that offers consumers a lower rate for car use. Some insurance companies offer trial programs.

Environmental Defense is a strong supporter of the new program. They currently promote a Pay-As You-Drive Insurance (PAYD), program for auto insurance companies across the United States. This new concept would tie insurance policies to an odometer, rather than just a renewal day on the calendar.

According to the Environmental Defense PAYD would not only save money but also reduce pollution. An official from the Environmental Defense stated that PAYD offers a financial incentive to drive less. It is expected to reduce congestion and driving by 10 to 12%. “Driving less reduces pollution and toxic runoff from roads. It also has positive impacts on the climate.

PAYD would make auto insurance more affordable by giving drivers more control over their premiums. This is something the National Organization of Women’s Cents Per Mile group would love to see happen. According to NOW, low-income drivers are often subject to a higher level of insurance, which is not justified by their smaller mileage. Drivers are forced to drop or cancel their auto insurance policies due to this burden. This new program will reduce non-insured drivers and help lower the financial burden on low-income drivers.

How does the PAYD program operate? There are currently two methods that can be used to determine car mileage. Installing a proprietary odometer with an embedded cell phone to record your mileage is the first. Another technique is to install a GPS device in an embedded phone such as OnStar to record your actual routes.

This method is opposed by many groups because it could infringe on privacy. The GPS device has its benefits. It would not only track your mileage but also record where and when you drove. It might be more expensive to drive in congested areas during rush hour than the savings that you could get if you drove during off-peak times.

What would it cost?

Your current annual rate would be converted by auto insurance companies into a per-mile fee. Auto insurance companies would assign your vehicle to one of their rate groups based on your zip code, type, or usage. After determining your per-mile rate, you will most likely be required to pay an upfront fee for the predetermined mileage. You could receive a rebate depending on how much you drive.

Test the waters.

Two pilot programs are currently in operation in the United States. One program is offered by OnStar. This program has partnered with a national insurer to offer a mileage discount. This program is only available to motorists with GM vehicles that are equipped with OnStar. It allows them to receive an additional discount based upon how many miles they have driven. GM motorists can enjoy discounts up to 40% and hundreds of dollars in savings each year. Drivers who drive less than 15,000 miles per annum are eligible for discounts. The greater the vehicle mileage, however, the larger the discount. The program is currently only available in Arizona and Indiana, Illinois, and Pennsylvania.

Minnesota offers another program for drivers who own 1996-year-old cars. The test uses a small electronic device of matchbox size that plugs into the owner’s ODBII port. The sensor will detect how much, how fast, and when the vehicle has been used. The information can then be used to calculate the customer discount. The voluntary, free program could save you up to 25% on your car insurance. This is a significant savings if you’re trying to save money.