Are You a Low-Mileage Driver or a Good Driver? The Difference is Key.
Two Different Paths to a Big Discount.
There are two new ways to save on car insurance, and they measure two different things. Pay-Per-Mile insurance is for people who are low-mileage drivers. The less you drive, the less you pay. It’s that simple. Usage-Based Insurance (UBI) is for people who are good drivers. It uses technology to monitor your driving habits, like your braking and acceleration, and rewards you for being safe. One is about how much you drive. The other is about how well you drive.
Pay-Per-Mile: The Ultimate Hack for People Who Barely Drive.
I Work From Home and My Car Insurance Bill Was Cut in Half.
I started working from home, and my car just sat in the garage most of the week. I was still paying a huge premium for a car I was barely using. I switched to a Pay-Per-Mile insurance plan. My bill now has two parts: a low, flat base rate, and a charge of a few cents for every mile I drive. My monthly bill went from $120 to about $55. It’s a revolutionary model that fairly prices insurance for the millions of people who are low-mileage drivers.
Usage-Based Insurance (UBI): Let Your Insurer “Spy” on Your Driving for a Big Discount.
My Good Habits Finally Paid Off.
I signed up for my insurance company’s Usage-Based Insurance (UBI) program, often called “telematics.” They sent me a small device to plug into my car’s diagnostic port (or I could use their app). This device monitored my driving behavior—how fast I accelerated, how hard I braked, what time of day I drove. Because I’m a safe, responsible driver, I earned a 30% discount on my premium at my next renewal. It was a fantastic way to be rewarded for the good driving I was already doing.
The “Telematics” Revolution: How Your Phone is Changing Car Insurance.
Your Smartphone is Now Your Underwriter.
The technology behind Usage-Based Insurance is called “telematics.” It’s the same technology that’s in your smartphone—GPS and accelerometers. Insurance companies are now using this to get a real-time, accurate picture of your driving risk. Instead of relying on crude, old-fashioned metrics like your age and zip code, they can now price your insurance based on your actual, on-the-road behavior. It is the biggest revolution in the history of car insurance.
Metromile vs. Progressive Snapshot: Two Different Ways to Save.
The Two Flavors of Modern Insurance.
Metromile is the most well-known Pay-Per-Mile insurance. Your rate is almost entirely based on the number of miles you drive. Progressive’s Snapshot is the most well-known Usage-Based Insurance program. Your rate is based on your driving habits, like hard braking and late-night driving. One is perfect for the low-mileage driver, regardless of their habits. The other is perfect for the high-mileage but very safe driver.
The Privacy Trade-Off: Is a Discount Worth Giving Up Your Data?
The Billion-Dollar Question of the Digital Age.
Both of these new insurance models come with a major trade-off: privacy. To get the discount, you have to agree to let your insurance company collect a massive amount of data about where you go and how you drive. For many people, the significant savings are well worth it. For others, the idea of their insurance company tracking their every move is a creepy and unacceptable invasion of their privacy. It is a personal decision that everyone must make for themselves.
I Tried Pay-Per-Mile for a Month. Here’s How Much I Actually Saved.
A Real-World Test for a Remote Worker.
As a remote worker, I decided to try a pay-per-mile plan. My base rate was $40 a month. My per-mile rate was 6 cents. Last month, I drove a total of 250 miles. My bill was the $40 base plus $15 for the miles (250 x $0.06), for a total of $55. My old, traditional policy was $115 a month. I saved $60 in a single month. For anyone who drives less than about 800 miles a month, this model can provide dramatic, real-world savings.
If You Work From Home, Pay-Per-Mile Could Cut Your Bill in Half.
The No-Brainer Choice for the Modern Workforce.
The rise of remote work has created a massive new market of low-mileage drivers who are subsidizing the high-mileage commuters. If you work from home and your car is primarily used for weekend errands, you are almost certainly overpaying for your car insurance. A Pay-Per-Mile policy is a no-brainer. It aligns your insurance cost directly with your actual usage, which can easily cut your annual premium by 40-50% or more.
The UBI Factors: Hard Braking, Acceleration, and Late-Night Driving Are Costing You.
How to “Win” the Usage-Based Insurance Game.
If you have a Usage-Based Insurance program, you need to know what they are tracking. The three biggest factors are: 1) Hard Braking: It suggests you are following too closely. 2) Rapid Acceleration: It suggests aggressive driving. 3) Late-Night Driving: Driving between midnight and 4 a.m. is statistically much more dangerous. By being mindful of these three simple things—driving smoothly and avoiding the late-night hours—you can maximize your discount and “win” the UBI game.
The Future of Car Insurance is Personalized. Which Model Fits You?
The End of “One Size Fits All” Pricing.
The era of one-size-fits-all car insurance is ending. The future is personalized pricing based on your individual behavior. The question you need to ask is, which model is a better fit for me? Am I a person who drives very little? If so, Pay-Per-Mile is my answer. Am I a person who drives a lot, but is a very safe and careful driver? If so, Usage-Based Insurance is my answer. This new world of personalized insurance gives you the power to choose a model that fairly reflects your unique driving DNA.