Pay-As-You-Drive Auto Insurance: Coming to a Highway Near You?

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If you drive infrequently, you could save a bundle from paying by the mile, rather than a flat amount for coverage over a specified time period. One study, in fact, says that the average driver would save $270 per car with a mileage-based insurance policy.

The problem, of course, is that most drivers don’t have the option of buying pay-as-you-go auto insurance. The Dallas Morning News reports on an insurer called MileMeter, which uses a slogan that appeals on a common sense level, especially to folks who are sick of overpaying for a service they barely need: “The less you drive, the less you pay.”

Before you get your hopes up of dropping your insurer and opting for a by-the-mile policy, take note that MileMeter is only available to drivers in Texas. But the pay-as-you-drive model, which makes financial sense only for people who drive less than 12,000 miles a year, is spreading, according to the Morning News:

About 10 auto insurers have added or started testing pay-as-you-go policies in the last two years. Such policies are now offered in about 35 states by insurers such as Progressive, American Family and GMAC Insurance.

So how much can a driver save? MileMeter says its average customer pays about $200 a year, in increments of up to 6,000 miles at a time, while the average Texas driver pays $854 annually. That average Texas driver probably has way more coverage than a MileMeter customer, mind you. But still, that’s a huge difference, which quickly adds up into the thousands over a couple years’ time.

How does MileMeter verify that drivers aren’t going over their mileage limits? The company’s FAQ page explains:

We ask for a photograph of your car’s odometer (with your driver’s license visible in the photograph) at the initial purchase, and each 6-month renewal. This lets us confirm your odometer reportings as well as verify that it’s your car. The photos are uploaded from your computer directly to the site during the purchase process.

MileMeter reserves the right to request additional odometer photos at any time during the policy period.

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