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Is Pay-Per-Mile Insurance a Better Deal?

There's a new kid on the block when it comes to car insurance. Some companies like Metromile are offering low-cost insurance to drivers that don't drive very much. Is it worth it, and right for you?
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Mile by Mile Insurance
If you live in the US, and more importantly not in a highly developed urban area, you are pretty much guaranteed to need a car. Even if you work nearby or from home, you'll likely still need to go shopping, visit friends, go to doctors appointments, and so on.

For those of us that don't drive very much, a hefty insurance premium can seem like a waste of money. That's why companies are beginning to appear that are offering an insurance premium that changes every month. Instead of a flat fee, the price comes from the number of actual miles driven. Studies show that the more miles a driver covers, the more likely a vehicle is to be involved in an accident.

Using this logic as a basis for a business plan, pay-per-mile insurance assumes that you as a driver or less of a risk if you spend less time on the road.

How it Works
In the case of Metromile, the system uses a device that connects to your car's computer. The device called Pulse records information about your car such as how many miles you drive each day. This information is then used to calculate your monthly insurance premium.

Metromile has a cap of 250 miles per day. If you are going on a long road trip, for example, you will never pay for more than 250 miles a day.
Not for Everyone
While this kind of service may seem compelling, it's not for everyone.

First and foremost, the service is only available in a handful of states. Second, because it requires the use of a device that connects to your car's computer, it only works with vehicles that are new enough to have such equipment.

If you are a person who values privacy, and services like Metromile will not work for you.

First, just like with any other traditional car insurance agency, you need to give them a full profile of all of your private data just to get a price and to see whether or not you even qualify for the service at all. Next, with a smart device plugged into your car 24 hours a day and continuously transmitting information to a private company, it's safe to say that they will be collecting and processing your data.

And of course, it goes without saying that if you drive a lot, you likely won't save any money using a service for drivers that don't drive very much.
Summing it Up
Metromile and other pay-per-mile insurance plans could be the perfect fit for a very particular type of driver in a specific location with a unique profile of driving.

But for the rest of us, and especially for those of us who value privacy, pay-per-mile isn't ready for prime time yet.