The new subscription-based car insurance service; Pay Per Mile. But is it right for you?

It is estimated that if you drive less than 6000 miles a year you are likely to be overpaying for your car insurance. This is because an annual policy is worked out with an estimation of the mileage you will do in a year and if you do less you will still pay the same amount.

Subscription services have become increasingly popular in recent years as an affordable way to enjoy a product or service. Now motorists can take advantage of this subscription model to pay their car insurance.

What is Pay per mile?

Unlike your pay monthly option on an annual policy, the pay per mile model allows drivers to only pay when they use their car. No longer do you need to be tied into an annual agreement you can now opt for a more flexible pay as you go alternative.

Pay per mile insurance works by tracking the number of miles you drive and then charging you for those miles. You will also be required to pay a small monthly premium to cover the car while not in use. Every car regardless of if it is being driven or not must be insured to be considered ‘roadworthy’ and your tax valid especially if the vehicle is parked on a public highway.

There are also two other pay as you go options available to drivers depending on how you use your car, pay how you drive (black box insurance) and pay per hour. Black box or telematics insurance monitors how you drive looking at things like, speed, acceleration and braking to determine your premium. The ‘safer’ you drive the lower your policy will be. Pay per hour is more for emergency cover, cover to drive someone else’s car or borrowing a car, a short-term hour by hour insurance.

How does pay per mile insurance work?

Most pay per mile insurers will give you a telematics device that you put into the car which will measure the mileage you do normally using GPS technology. This device will then connect with an app or webpage to show you your mileage and calculate the cost of the insurance. The cost is affected by similar things usual annual insurance is such as, the make and model of the car, age of the car, your driving history, location, and occupation but your mileage cost could be as little as 4p per mile.

There is no annual contract you just pay each month for what you use alongside your small premium to insure the car while not in use. This way you can monitor exactly how much you use your car and how much each use will cost, allowing you to effectively budget each month.

Just like annual policies pay per mile provides fully comprehensive, third party and third-party fire and theft as well as also offering a range of additional benefits such as windscreen cover, breakdown, personal accident cover, and legal cover.

Is pay per mile right for me?

If you travel less than 110 miles a week then pay per mile could be a good option for you. There are several things you may want to consider before making the decision to use this type of insurance, such as how you commute to work. Do you always drive to work? Or do you sometime use public transport? Could you do a mix of both as a cost-effective way to commute? Finding ways to reduce your car usage is a great way to save money on fuel but it could also make pay per mile insurance a more viable option too. If you’re someone that only uses your car for short trips around towns or mostly weekend use, then your likely be paying more for an annual premium than you would for pay per mile.

Pay per mile can also be a hassle-free option for keeping your car on the road. Cars must be insured to be ‘roadworthy’ so if your parking is on a public road but you’re not using the car you will be paying a premium to do so on an annual policy whereas pay per mile will only be charging you that small monthly premium without any mileage charge. It also means you do not have to sorn your car if you’re going away for a while and want to save money allowing you to jump straight back into your car when you need to.

The pay per mile model is great for those looking for a cost effective and flexible option for their car insurance. Allowing drivers to no longer be tied down to annual contracts and high premiums. However, for those with high mileage or regular car use you may find your normal annual policy works out more cost effective, so it is always worth comparing prices before committing to any policy.