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

Pay-per-mile car insurance could lower your premium, but only for some drivers.
Kayda NormanNov 10, 2021

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If you have a car but barely drive it, 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% according to some carriers — but only if you truly don’t drive regularly.

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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 don’t generally drive a lot.

Pay-per-mile insurance is different from a low-mileage discount offered by some auto insurers. Instead of a percentage off your traditional policy, low-mileage car insurance determines your rate based on how far you drive.

How pay-per-mile car insurance works

Pay-per-mile insurance has a base rate, which stays the same. The carrier typically creates a base rate using factors such as gender, age, and car make and model, similar to a traditional car insurance quote.

You’ll also receive a per-mile rate, although charges are typically capped, commonly at 250 miles per day. Although your rate is calculated differently, you get the same coverage as a traditional policy and aren’t limited to specific coverage or minimal liability insurance.

Companies use technology known as “telematics” to track how far you drive using an app or other device, and it can also track risky habits — think hard braking or quick accelerating.

Some pay-per-mile programs like Nationwide Smartmiles and Metromile also collect and use driving habit data to determine rates or discounts. There are other usage-based programs that use telematics to produce a discount (or surcharge) and do not take mileage into account.

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 the carrier a photo of your odometer once a month.

Can you save with pay-per-mile insurance?

The cost of pay-per-mile insurance depends on how much you drive, but also on the company you choose and on your own driving history and characteristics, like traditional auto insurance.

Don’t buy into the savings the company says you may find — in order to know how much you can save over your current carrier, you’ll need to do the math after you get a quote.

To estimate how much you’ll pay for pay-per-mile insurance, use the following formula: Monthly base rate + (Per-mile rate x Approximate number of miles you drive per month).

For instance, let’s say your pay-per-mile quote shows a monthly base rate of $34 and a per-mile rate of 5 cents. You generally drive 800 miles a month.

You can calculate your monthly rate as: $34 + (.05  x 800) = ($34 + $40) = $74.

Again, this is only an estimate, and your actual cost per month will vary depending on how many miles you drive.

Not sure how many miles you drive? Keep track of your mileage before trying a pay-per-mile plan to give you a better idea of what your rate will be.

Another option is Metromile’s Ride Along program. Metromile will track your driving for about two weeks through its app and give you an estimated bill based on your driving. You are not obligated to switch to Metromile if you use the Ride Along feature.

Who should use pay-per-mile car insurance?

Pay-per-mile insurance is most likely to benefit people who drive very little, which may include those who:

  • Work from home.

  • Are in college.

  • Take mass transit, walk or use another mode of transportation.

  • Have a second vehicle they rarely use. Tip: Consider creating a separate pay-per-mile policy for only this car to keep your mileage low.

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 low-mileage car insurance.

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

Companies that offer pay-per-mile insurance

There are only a handful of insurers that offer a pay-per-mile insurance option. Some companies, like Metromile, specialize in this type of insurance, while a few large insurers, such as Allstate, also offer a per-mile option.

Below are the companies offering pay-per-mile insurance.

How it works: A plug-in device in your car and a mobile app track your driving.

Where available: AZ, D.C., DE, FL, ID, IL, IN, MA, MD, NJ, OH, OK, OR, PA, TX, VA, WA, WI, WV.

How it works: Specializes in pay-per-mile car insurance. A plug-in device in your car tracks your driving. Driving behavior is used to set rates in some states including AZ, IL, OR and VA, when you renew your policy.

Where available: AZ, CA, IL, NJ, OR, PA, VA, WA.

How it works: Specializes in pay-per-mile car insurance. You'll need to send a photo of your odometer once a month to track mileage.

Where available: AZ, GA, IL, OH, OR, TX.

How it works: A plug-in device in your car tracks your driving.

Where available: All states except Alaska, California, Delaware, Hawaii, Louisiana, Massachusetts, New Jersey, New York, North Carolina and Oklahoma.

Frequently asked questions

It depends on how often you drive. If you consistently log low mileage, pay-per-mile insurance may be cheaper than a traditional auto policy. But if you’re considering it only because you know you’ll be temporarily driving less, a traditional policy is still the best choice.

Carriers check your mileage in a few different ways. Your insurer may track your mileage through a device installed in your car’s diagnostic port, or an app on your phone. Other companies might ask you to take a photo of your odometer on a regular basis.

The best pay-per-mile company for you depends on where you live and your insurance needs. Although Metromile and Mile Auto specialize in low-mileage auto insurance, their programs aren’t as widely available as Allstate Milewise and Nationwide Smartmiles. Anyone looking to bundle their insurance will also want to consider Allstate or Nationwide.

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