The Ask an Agent series answers popular questions about car insurance with expert advice from AAA Insurance agents. In this installment, agent Katrina Harrington discusses some pros and cons of mileage-based and standard premiums.
What is the difference between pay-per-mile and traditional auto coverage?
Harrington: With pay-per-mile insurance, you pay a base rate and then for each mile that you drive, your insurance company charges you a certain amount—and it could be cents or dollars, depending on the company. With the pay-per-mile insurance, the more you drive, the higher the rate can get. With traditional insurance, like the policies AAA offers, [you get] unlimited mileage. We don’t charge for mileage at all. You can drive as much as you want, and your insurance will be the same price.
How can I choose the best type of coverage for me?
Harrington: Pay-per-mile insurance can be a good type of policy for someone who hardly drives at all, like a “snowbird” who comes to Arizona from colder [states for] the winter. They’re only here part-time. As long as they have a good driving record—because that could definitely impact what you pay per mile—that might be the way to go. But for people who drive back and forth to work every day, who take trips, or who maybe don’t have a great driving record (who’ve had an accident or a ticket), traditional insurance would probably be the best option.
It sounds like pay-per-mile can save low-mileage drivers money. What are the downsides?
Harrington: There are a couple downsides. Since these [policies] are [offered by] newer insurance companies, they don’t have a lot of claims experience. Also, because they’re newer, we don’t really know their AM Best rating. We don’t know how their customer service, claims, and financial records are. Also, a lot of times with those companies, you’re required to plug a device into your car [that] tracks where you drive and could also look at driving habits like acceleration and speeding. Some people might want to steer away from that.
How does AAA compare?
Harrington: AAA has an AM Best rating of A. We’re financially stable. You can reach customer service 24/7, and we have quick claims service. I carry AAA insurance, and I personally had [to file] a claim. AAA got me into a shop the same day, and my car was fixed within a week or two. AAA handled everything on the back end, so I didn’t have to do too much myself. The claims representative that I worked with was amazing and even followed up with me afterward to make sure everything was OK.
I recommend researching an insurance company before you switch. You want to make sure that you have someone looking out for you, instead of just trying to earn a dollar. AAA is definitely there for our Members.