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Pay-per-mile car insurance is a type of insurance policy that is composed of a base rate that is calculated using factors such as driver's age, credit score, driving history, the kind of car the policyholder drives, gender and other factors, and the number of miles the policyholder drives. To calculate how many miles a policyholder drives, insurers use an in-car device that tracks the number of miles it logs each month. Drivers who are not driving at all will only pay the base rate. However, drivers who venture on the open roads will pay a monthly premium that reflects their mileage that includes a daily mileage ceiling above which the policyholder won't be charged.
Policyholders thinking to switch to a pay-per-mile plan should consider the following:
- Who should get this policy. The pay-per-mile basis on which premiums are calculated makes this policy an unattractive option for policyholders who drive a lot. For this reason, people who log a lot of miles behind the wheel are less likely to purchase pay-per-mile insurance. On the other hand, this is a great option for people living in urban areas, or for people who don't have to use their cars that often.
- How much money drivers can save. It all depends on how many miles they drive. To check how much they can save, policyholders can get quotes from traditional auto insurance providers and pay-per-mile insurers and use their estimated annual mileage as a predictive marker in calculating how much each option might cost them.
- The differences between pay-per-mile and pay-as-you-drive policies. Pay-as-you-drive policies use a telematics device to track the driver's driving patterns. The devices track speed, hard braking, and a few other factors to determine how much a driver is eligible to save for safe driving. On the other hand, pay-per-mile insurance is only calculated using a base rate and a per-mile rate. How recklessly a driver drives do not affect the cost of pay-per-mile insurance.
- Can it be canceled. Although policyholders can cancel their pay-per-mile policy whenever they want, many providers charge a fee when doing so. However, this fee can be waived if the policyholder switches to a traditional, unlimited miles policy.
- What it covers. A pay-per-mile policy offers the same coverage as a traditional policy. However, while a traditional policy charges a monthly premium based on factors like age, gender, car make, model, driving history, and so on, a pay-per-mile policy charges policyholders a substantially reduced base fee along with a per-mile fee that is usually capped at a certain per-day mileage limit.
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