Mile-Based Auto Insurance – Texas

On January 23, 2002, the Texas Department of Insurance Commissioner approved rules to enable insurers to offer automobile insurance plans that allow consumers to purchase insurance coverage on a per-mile basis. Texas is the first state to approve such a plan for private passenger automobiles. The Commissioner’s order implements legislation approved during the 2001 session (H.B. 45) of the Texas Legislature.

Therules give drivers a choice of two plans: unlimited mileage or a cents-per-mile rate. If a consumer opts for the per-mile rate, he or she must purchase a minimum of 1,000 miles in advance. The amount of mileage purchased is added to the vehicleâs odometer reading and shown on the insurance card. Subsequent purchases during the policy year are made at times and in amounts needed, with the new limit displayed on a newly issued insurance card.

If the car is driven beyond the amount of miles purchased, the car is uninsured. Odometers are inspected if there is a claim, when the contract is renewed or when the vehicle owner switches insurers. Non-driving coverages are charged on an annual basis. As with conventional vehicle insurance, a driver will get a refund or premium credit for any unused mileage.

Any mile-based rating plan offered to consumers would require the Commissioner’s approval.

Proponentsof the plan say older drivers, women, lower income drivers, households with more cars than drivers and commuters will all benefit from the new auto insurance policy.

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