Pay-Per-Mile Car Insurance: What You Need to Know

Pay-per-mile car insurance and other usage-based insurance could lower your premium, but only for some drivers.

Kayda NormanOctober 2, 2020
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If you have a car but barely drive it (especially during the pandemic), you might find yourself wondering if there’s a cheaper car insurance option beyond traditional coverage. Pay-per-mile insurance might save you money — up to 40% in some cases — but only if you truly don’t drive regularly.

What is pay-per-mile insurance?

Pay-per-mile car insurance lets you pay for coverage based on how many miles you drive. Because of this, it’s best suited for people who aren’t driving a lot over the long-term.

Some companies, like Metromile, specialize in this type of insurance, while a few large insurers, such as Nationwide, also offer a per mile option. This is different from a low-mileage discount offered by some auto insurers. Instead of a percentage off your traditional policy, pay-per-mile car insurance determines your rate based on how far you drive.

Pay-per-mile insurance is a type of usage-based insurance. Usage-based programs use telematic technology to track your driving behavior with a mobile app or device that plugs into your car’s diagnostic port to create your customized car insurance rate.

There are two types of usage-based insurance:

  • Pay-per-mile, which creates a rate depending on how many miles you drive.

  • Pay-as-you-drive, or pay-as-you-go, which creates a rate depending on your driving habits. Some programs may increase your rates if you have bad driving habits.

Who should use pay-per-mile car insurance?

Pay-per-mile insurance is best suited for people who aren’t driving much for a long period of time, including drivers who:

  • Work from home.

  • Are in college.

  • Don’t drive because they take mass transit, walk or use another alternative mode of transportation.

  • Have a second vehicle they rarely use.

Americans drive around 13,500 miles a year on average, according to the U.S. Department of Transportation's Federal Highway Administration. It’s difficult to know, though, how little you need to drive to benefit from pay-per-mile insurance.

Mile Auto, a pay-per-mile insurer, states on its website that if you drive less than 10,000 miles a year you’re likely paying too much for auto insurance. Nationwide notes you’re most likely to benefit from its pay-per-mile insurance program if you drive less than 8,000 miles annually.

How does pay-per-mile car insurance work?

Pay-per-mile insurance has a base rate, which is the same each month, then a per-mile rate, which typically has a cap, such as 250 miles per day.

Your base rate is determined like a traditional car insurance quote. Factors such as gender, age, and car make and model are considered to create a rate. Although your rate is calculated differently, you get the same coverage as a traditional policy and aren’t strictly limited to specific coverage such as liability insurance.

Companies use telematics to track how far you drive. Some programs like Nationwide Smartmiles also look at driving habits to determine if you’re eligible for a discount.

Likewise, Metromile customers in Oregon are also eligible to earn a discount by using the company’s “Ride Along” feature. The program tracks your driving for about two weeks through its app. Based on the results, the company will estimate your monthly bill. Metromile also looks at driving behavior in Arizona, Illinois, Oregon and Virginia to determine your pay-per-mile and base rate upon renewal.

If you’re not comfortable with sharing data, Mile Auto offers pay-per-mile insurance without using a plug-in device. Instead, you’ll need to send a photo of your odometer once a month.

Companies that offer pay-per-mile insurance

Company

Estimated savings*

How it works

Where available

Allstate Milewise

Up to 20% for 10,000 miles

  • A plug-in device in your car and a mobile app track your driving.

  • Your rate includes both a daily base rate and per-mile rate.

AZ, DC, DE, FL, ID, IL, IN, MA, MD, NJ, OH, OR, PA, TX, VA, WA, WV

$741 a year, on average

  • Specializes in pay-per-mile car insurance.

  • A plug-in device in your car tracks your driving.

  • You pay a base rate each month, plus a per-mile rate.

  • Driving behavior is used to set rates in some states including AZ, IL, OR and VA, when you renew your policy.

AZ, CA, IL, NJ, OR, PA, VA, WA

Mile Auto

Up to 30% to 40% over your previous company

  • Specializes in pay-per-mile car insurance.

  • You pay a base rate each month, plus a per-mile rate.

  • You'll need to send a photo of your odometer once a month to track mileage.

GA, IL, OR

Nationwide Smartmiles

Up to 10% for safe driving

  • A plug-in device in your car tracks your driving.

  • Your rate includes a daily base rate and per-mile rate.

AZ, CO, CT, DC, FL, IA, ID, IL, IN, KS, MD, ME, MN, MO, MT, ND, NE, NH, NM, NV, OH, OR, PA, SC, SD, TX, UT, VA, VT, WA ,WI, WY

* Based on information on insurers' websites.

Pay-as-you-drive policies

Pay-as-you-drive policies are a type of usage-based insurance that determines your rate by your driving behavior. If you drive a lot, aggressively and in the middle of the night, these programs could increase your car insurance rates.

Commonly tracked driving behaviors include:

  • Hard braking.

  • Acceleration and speed.

  • Time of day you drive (late-night driving may be considered unsafe).

  • How often you drive.

  • Mileage.

  • Cell phone use (if tracked by an app).

Companies that offer pay-as-you-drive policies

Company

Discounts offered

How it works

Where available

Geico DriveEasy

Up to 25% for signing up

  • Install an app that tracks your driving behavior to create a customized rate.

  • Your rates may go up if you have risky driving habits.

CT, IL, OR, PA, WI

Progressive Snapshot

$145 per year, on average

  • Install an app on your phone or plug a device into your car to get a customized rate depending on your driving habits.

  • Your rate could see an increase depending on your driving habits.

Available in 48 states and Washington, D.C.; not offered in CA and NC. Sign-up discount not available in AK, HI and NY.

Up to $900 a year

  • Specializes in pay-as-you-drive insurance.

  • Your driving is tracked for about three weeks by installing the Root app on your phone.

  • After the test-drive period, you get a quote.

  • Only insures good drivers.

AR, AZ, CA, CO, CT, DE, GA, IL, IN, IA, KY, LA, MD, MS, MO, MT, ND, NE, NM, NV, OH, OK, OR, PA, SC, TN, TX, UT, VA, WV

Travelers Intellidrive

Up to 20%

  • The mobile app tracks driving for 90 days.

  • A discount isn't guaranteed, and drivers could see an increase in their rates.

AR, AZ, AL, CO,CT, DC, FL, GA, IA, ID ,IL, IN, KS,KY, MA, MD, ME, MN, MO, MS, MT, NE, NH, NJ, NM, NV, OK, OH, OR, PA, SC, TN, TX, UT, VA, VT, WA, WI

Other telematics reward and discount programs

Some telematics programs aren’t usage-based. Rather than setting your car insurance rate on your driving behavior or mileage, these programs use telematics to create a customized discount or give you cash back. For instance, your car insurance rate might be $100 per month, but through a telematics program, you may earn a 10% discount for good driving behavior.

These programs, like Allstate’s Drivewise, don't directly increase (or decrease) your rate. Because of this, there likely isn’t a downside financially. However, your rates may still go up based on traditional factors such as your driving history and location regardless of whether you participate in these programs.

However, these programs still collect data about your driving habits (including hard braking, acceleration and location), so skip it if you’re uncomfortable sharing this information.

Companies that offer telematics reward and discount programs

Company

Discounts offered

How to save

Where available

Allstate Drivewise

  • Allstate members can receive a discount from their auto policy for signing up.

  • Program is also available for non-Allstate customers.

  • Savings vary. Receive cash back after 50 trips and every six months after that.

  • Earn Allstate Rewards Program points that can be exchanged for gift cards and more.

  • Keep your driving speeds under 80 mph.

  • Avoid late-night driving. Avoid hard braking.

  • Available in all states.

  • Details may vary by state. For instance, Allstate rewards are unavailable in NY.

Nationwide SmartRide

10% upon initial sign-up and up to 40% depending on your driving habits

  • Keep your miles low.

  • Avoid hard braking and acceleration.

  • Avoid sitting in traffic.

  • Avoid late-night driving between 12 a.m and 5 a.m.

All states except MA

Safeco RightTrack

Between 5% and 30%.

  • Avoid late-night driving between 12 a.m. and 4 a.m.

  • Avoid hard braking and acceleration.

  • Have all drivers on your policy participate in the program to improve your overall score.

AL, AR, AZ, CO, CT, FL, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, MI, MN, MO, MS, MT, ND, NE, NH, NM, NV, NY, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY.

State Farm Drive Safe and Save

Up to 30%

  • Decrease the number of miles you drive a year.

  • Keep your speeds low.

  • Avoid hard braking.

  • Avoid late-night driving.

  • Limit phone use while driving.

Not available in CA, MA, and RI

Telematics tips

If you decide to use pay-per-mile car insurance or another telematics program, it will differ in many ways from traditional auto insurance. Make sure to ask the following questions before changing policies:

  • For pay-per-mile insurance, is there a daily mileage cap?

  • Are you being tracked by a plug-in device, app, both or something else?

  • Is the device or app linked to a specific car or driver?

  • What information is being tracked?

  • What driving behavior can help you save?

  • Can your rates increase based on driving behavior?

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