Car insurance by the mile is still in its infancy. As of 2017, you could purchase this type of insurance from a handful of companies: Metromile, National General Insurance and Allstate’s MileWise. It means exactly as the name implies, drivers have the potential to save money by only paying for the exact mileage accrued in a year. Devices are added to the insured vehicle to accurately measure mileage. Compare to a traditional policy where drivers are asked by an agent to estimate mileage driven each year.

How to Buy Insurance by the Mile

Although more carriers are offering pay by the mile car insurance, not all serve Texas. Metromile is offered in only 4 states, Texas not one of them as of 2017. In 2016, Allstate’s Milewise becamse available as a second option for Texas drivers. Allstate also owns Esurance which also offers pay per mile insurance, but only for residents of Oregon.

If you are considering auto insurance by the mile, you should also consider a traditional policy with a low mileage discount and usage based insurance, like Progressive’s Snapshot.

Insurance By the Mile Vs. Usage Based Insurance

Both usage based insurance and insurance by the mile involve a tracking device added to a vehicle. This device shares data, such as mileage with the insurance carrier. Metromile and National General Insurance claim to not use quality of driving data – braking hard, driving fast, time of day or other factors. While usage based devices, such as Progressive’s Snapshot and Allstate’s DriveWise, do use driving data. The idea is to promote safer driving habits, savings, although it could also lead to a higher premium.

Is it Available for Everyone?

No, you must be willing to change carriers in a lot of cases, because only a few national companies provide this type of auto insurance.

It will be limited by state, and your vehicle may not be compatible with the on board tracking installed into the car’s diagnostic port. This gives access to odometer readings, and for some usage based policies, the speedometer and entire electronic system. National General Insurance only works with OnStar. So you would need OnStar installed in your vehicle to be eligible.

What are the Potential Cost Savings?

All carriers of pay per mile insurance and usage based insurance advertise savings, anywhere from 10 to 60%. It truly depends on how you drive and especially how little you drive.

What are the Disadvantages?

There are still few carriers offering this type of insurance and a list of requirements needs to be met as a driver. Even if you do initially qualify, going over on mileage could require switching to a normal auto insurance policy in the future. This is a hassle most drivers do not want to deal with…

Don’t assume the pay per mile insurance will be less, compare with traditional policies which are available everywhere and many do already provide low mileage discounts. Speak with an independent insurance agent to understand your options.

Several usage-based insurance carriers claim you won’t be charged more if you drive poorly, but it’s unknown if this policy will change in the future.

Pay per mile and usage based insurance are the most innovative changes to car insurance in the last decade. There will continue to be challenges and developments that could make this type of insurance more viable for more people.