Can RAC Pay-by-Mile Automotive Insurance coverage Save You Cash? – Which? information

The new car insurance from RAC is the latest pay-by-mile policy, which is an alternative to traditional fixed premiums.

Successive lockdowns have changed the nation’s driving habits, and many of us are swapping a street commute for a walk into the living room.

If your car is gathering dust in the garage, you might want a policy that specifically insures you for the miles you actually drive – especially if you’re not sure how much you’ll be driving after the lockdown ends. In short, this is what a pay-by-mile policy offers.

Still, there are a few things to consider when it comes to choosing a car insurance policy. So it pays to familiarize yourself with how pay-by-mile deals work before making a decision.

Here which one? Check out pay-by-mile car insurance to decide if it’s right for you.

This is how pay-by-mile insurance works

When you get standard auto insurance, your insurer (or comparison site) will ask you how far you will go in a year. This estimated mileage is then combined with a number of other factors (including your age, car model, and where you live) to create a quote.

The obvious downside is that your guess could be wrong. This was the case with many drivers last year when lockdown changed people’s lifestyles.

In a survey in February, 49% of 1,787 auto insurance holders said which ones? that their mileage had been reduced many times over as a direct result of the Covid-19 restrictions, but only 21% managed to get a discount or rebate from their insurer.

Instead of using an estimate, pay-by-mile guidelines measure the number of miles traveled and take these into account in your award calculation on a monthly basis. In addition, they will charge you a fixed fee to insure your vehicle while it is parked.

Insurers measure your mileage with a telematics device in your car – RACs are called “drive tags” and are located on your windshield. However, unlike other telematics or black box insurers, RAC is not interested in how you drive and its tag only monitors how many miles you drive.

RAC has described its new pay-by-mile policy as “groundbreaking”. However, this type of coverage is also available from other insurers such as By Miles who have been offering these policies for years.

According to Miles, revenue has increased dramatically over the past year. In February, the busiest month, sales rose 88%.

Would you save by switching to pay-by-mile?

According to By Miles’ analysis of MoneySuperMarket and data from the Office for National Statistics, 19.3 million low-mileage drivers could overpay for car insurance by purchasing traditional policies.

MoneySuperMarket data shows that standard auto insurance tends to serve those who drive a lot. In 2019, the average cheapest car insurance quote for someone driving 11,000 to 12,000 miles a year was £ 519. For people who drive 5,000 to 6,000 miles it was 734 pounds.

So if you’re someone who earns miles, pay-by-mile insurance may be more expensive because standard car insurance already bills you less.

The following table compares RAC’s pay-by-mile insurance to the standard policies:

Source: RAC, March 2021

How does RAC’s new policy compare to price?

According to the RAC, the pay-by-mile insurance could cost just 4 pence per mile. This applies in addition to a fixed “parked premium” and, as with all insurance offers, depends heavily on your specific circumstances and your driving history.

Both By Miles and RAC recommend their pay-by-mile policies for drivers who do not drive many miles. By Miles is aimed at people who drive less than 7,000 miles per year, while for RAC it is 6,000.

The By Miles policy applies to anyone aged 21 to 78 years. RACs currently apply to 21 to 65 year olds. However, there are plans to raise this age limit shortly.

When we got offers from RAC and By Miles with the same driver profile (27 year old who lives in south London and drives 6,000 miles a year), By Miles was cheaper in the long run. However, a direct comparison is complicated due to the different payment methods.

Our RAC offer was an estimated £ 62.12 per month (which covered a parked award plus 8.7 pence per mile) but our By Miles estimate was £ 55.49 (including a fixed monthly award and 6.5 pence) Mile) if we’ve selected the fixed spread expense payment option that is closest to your method of payment with RAC.

RAC charged an upfront fee of £ 68.62 while By Miles’ was charged a fee of £ 87.99. While By Miles initially cost more, we would have made up for this difference in three months with the lower premium.

However, By Miles also has the option of paying a larger prepayment (in our case £ 284.90) and then paying £ 32.50 per month, which turns out to be £ 55.98 per year cheaper than the lower prepayment.

One of the main selling points of the RAC policy is the ability for customers to leave at any time with no penalties. By Miles, on the other hand, charges a cancellation fee of £ 50.

Since we only tested one profile, we cannot definitely say which insurer is cheaper for all or even on average. Your specific driver profile can make a huge difference. If you are interested, you should seek offers yourself.

For a detailed breakdown of By Miles and RAC car insurance coverage, including the results of both companies in our expert analysis, see our By Miles test and the RAC test.

How to Find the Best Car Insurance

We recommend getting auto insurance, using comparison sites, and checking out insurers who only sell direct.

You should do this every year when your policy needs to be renewed as your current insurer may not be the cheapest option.

Finding the best policy for you is about more than just price. That is why we have reviewed 39 auto insurers and given them insurance policies based on those. Expert analysis and customer ratings based on real customer feedback.

Read our auto insurance reviews to find out who’s ahead of the game. We also have a step-by-step guide on how to find cheap car insurance.