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Could Driving Less Get You a Lower Car Insurance Rate?

lower-car-insurance-rate

Imagine your car insurance bill was based on specifically how many miles you drove in a month instead of a blanket estimate. This is exactly what the auto insurance startup, Metromile, is offering drivers in the seven states it currently serves — California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia and Washington.

How Metromile Works

Metromile, which launched in 2011, is a usage-based car insurance provider where policyholders pay based on how often they're on the road. The provider sends policyholders a wireless device called Metromile Pulse that plugs into the car's diagnostic port and reports how many miles the car is driven each trip. An app also pairs with the service and can tell drivers details about their car, like how to optimize gas usage and where their car is parked.

Each month, Metromile customers are charged a base rate of $30. From there, there's a per-mile driven rate, which is calculated by standard insurance establishing factors (explained in more detail below). At the end of each month, the Metromile Pulse reports how many miles you drove, and that gets multiplied by your mileage rate. Consumers aren't charged for any miles they drive past 150 miles per day (except in Washington, where the cutoff is 250 miles per day), and there is no limit on how much (or how little) you drive. According to a Metromile spokesperson, bills are likely to be different each month because of the variance of time spent driving, but "rates will not change within the 6-month period unless you request a change."

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Establishing Your Car Insurance Rate

Customers provide Metromile with some of the same information most insurers ask for when pricing out a policy.

"Just like other insurance companies, several factors are considered when creating customers unique base and per-mile rate," the spokesperson said in an email. "These can include: driver age, credit history (state specific), type of vehicle, driver history, and length of prior insurance (state specific)."

When Shopping for Car Insurance

Remember, it's important to read the terms and conditions of any insurance policy you are considering before signing up. You also may want to comparison shop to be sure you've found the best policy for you.

And whoever you opt to go with for car insurance, you should be aware that your credit score can influence your rate, depending on where you live.

"In every state except Hawaii, California and Massachusetts, credit impacts your car insurance rates," Neil Richardson, an insurance agent and advisor for The Zebra, as well as a Credit.com contributor, said in an email. "Your credit and driving history combine to determine your 'insurance score,' which is what insurance companies use to determine your rates. The better the insurance score, the better the rate."

It's a good idea to check your credit report before you shop around for new car insurance or an auto loan so you know where you currently stand and what you might need to do to improve your score. You can get your free annual credit report from AnnualCreditReport.com and then review it for any errors or areas to work on improving. To monitor how any changes you make to your spending habits are affecting your credit score, you can see two of your scores for free, updated each month, on Credit.com.


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