Pay-by-the-mile auto insurance sounds good to me

I don’t drive much, and being a frugal guy, I am always looking for ways to save money. When shopping for auto insurance, I always wished I could find a plan that rewarded me for not driving much. Think about it: All else being equal, a person who drives 1,000 miles per year is less likely to get into a car accident than someone who drives 15,000 miles per year. This business model makes sense, but is nonexistent.

Auto insurance is based on risk. The riskier a driver is, the more they pay. Insurance companies look at a myriad of demographic factors such as age, marital status, and place of residence. They also consider credit reports, driving history, and the type of car you drive. If they are going to consider all these facts, then why not take the amount of miles driven into account? Again, fewer miles would mean fewer accidents and fewer claims.

Fortunately, it looks like California might be moving to a pay-by-the-mile auto insurance structure. Basically, it would involve buying a certain amount of insured miles, and if those run out, buying more. For example, you might buy 10,000 miles for a year, but if you think you are going to go over, you can buy another 1,000 miles.

The program has the potential to save consumers a lot of money, especially if they drive sparingly. It could enable many people to purchase cars they wouldn’t other wise be able to afford because of the lower rates, and it might even encourage some people to use public transportation more often.