The Type Of Car Insurance That Can Help A Retiree Save Money

Cutting costs wherever possible is essential to living out a comfortable retirement. Even for folks who might be upper-class retirees, having a frugal mindset has its benefits when it comes to hedging against inflation and wealth preservation. However, cutting back at this age can come with some serious compromises. It could mean relocating to an area with a lower cost of living, downsizing to a smaller house, or foregoing luxuries like high-end cars or designer clothes. While many retirees are already in the age bracket that provides the cheapest car insurance rates, cutting transportations costs could allow you to avoid some more significant tradeoffs down the line. One way retired drivers could see serious savings in this regard is by opting for pay-per-mile car insurance over a standard policy.

Like its name suggests, pay-per-mile car insurance is a type of auto coverage where an individual's premium is determined by the amount of driving they do. The price of these policies is usually determined by combining a monthly base rate and a variable per-mile rate, which the insurer tracks and calculates via a mileage tracker that gets plugged into the policy holder's car. According to Nerd Wallet, these types of policies can help individuals save up to 40% on their car insurance. If you're a retiree that doesn't drive too often, switching from more standard coverage to a pay-per-mile policy could help lower insurance costs with minimal tradeoffs, especially if they don't drive much in the first place.

Retirees considering pay-per-mile insurance may be tempted by the savings, but it's essential to consider one's lifestyle and driving habits before making the switch. Many companies providing these types of policies often have daily mileage limits of around 250 miles to prevent unexpected bill spikes. Some companies might impose penalties for drivers who regularly exceed these caps, but frequent road trips will likely negate the potential savings of pay-per-mile insurance either way. While there is no yearly mileage limit, The Zebra advises that pay-per-mile insurance may only make sense for people driving under 10,000 miles per year. Driving more frequently than that is not considered low mileage in the eyes of most insurance companies, and as such, seniors who drive a lot may wind up paying more for this type of coverage.

A retiree's vehicle should also be considered before switching. Nationwide, for example, warns that its pay-per-mile coverage does not cover certain electric, hybrid, or diesel vehicles due to complications involving its mileage tracker. Pay-per-mile insurance is also not available in all states and may require additional upfront payments. While it can be a good option for certain people, there are still ways retirees can save money on auto insurance, even with a more conventional policy.