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Should you switch to pay-per-mile insurance?

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Pay-per-mile car insurance is a type of policy that adjusts your premium based on the actual number of miles you have driven in a given period of time. If you are retired, work remotely, live close to work or otherwise do not use your vehicle often, pay-per-mile insurance may help you lower the cost of car insurance.

Bankrate’s insurance editorial team has researched the pay-per-mile programs offered by some of the best car insurance companies in the industry. Understanding what options you have when it comes to this unique type of coverage might help you decide if a pay-per-mile policy is right for you.

What is pay-per-mile insurance?

With pay-per-mile insurance, your car insurance rates are determined by how many miles you drive in real-time. This may give you greater control over the cost of your coverage, helping people like high-risk drivers manage their car insurance budget.

Usually, pay-per-mile car insurance costs are divided into two categories:

  • Your base rate: This is the flat amount you’re going to pay (usually, each day or month). Insurers would use the same factors to set this rate as they do with any other car insurance policy in your state. That means things like your driving history, vehicle type and claim history come into play. Effectively, this portion covers the insurer’s basic financial risk for claims.
  • Your pay-per-mile rate: On top of your base rate, you pay by the mile. The charge per mile is usually small, but it can add up quickly if you drive a lot in any given month. But if you don’t drive much, the cost of pay-as-you-go car insurance may rival even the cheapest traditional car insurance policies. The less you drive, typically the lower the risk of an accident and therefore, the less financial risk assumed by insurers that a claim will be filed.

Generally, with pay-per-mile insurance, insurance companies equip your car with a mileage tracking device so they can track how much you are driving and bill you accordingly.

How is pay-per-mile different from telematics insurance?

While telematics and car insurance-by-the-mile both use technology in your vehicle to track your driving, they have different goals. With pay-per-mile coverage, your insurance provider is looking at how much distance you drive. With telematics, they look at your driving habits.

Telematics insurance typically offers safe driving discounts to people who use best practices out on the road, including driving the speed limit and avoiding aggressive braking practices. If you are a safe driver and you are looking to find cheaper car insurance, a telematics program could help you save money.

Which providers offer pay-per-mile insurance policies?

Pay-per-mile car insurance is a relatively new concept, although it is gaining in popularity. It is possible that the pandemic contributed to the growth of usage-based insurance policies, as more people have generally been staying home and driving fewer miles. However, several other circumstances — such as having a work-from-home job or living in a city and relying more on public transit — could also make pay-per-mile insurance a convenient choice.

Below are some of the pay-per-mile options from a few popular auto insurance companies. All the base rate and per-mile rate examples, along with the estimated savings, come directly from the insurance providers’ websites.

Program and car insurance company How it works Availability Estimated savings
Metromile Metromile’s plug-in device is called the Pulse. You pay Metromile a base monthly rate (e.g., $29) plus a per-mile rate (e.g., $.06). If you drive 250 miles on a given day, any miles beyond that are free. AZ, CA, IL, NJ, OR, PA, VA, WA 47%, on average
Mile Auto You send Mile a picture of your odometer once a month. Then, you pay your base rate (e.g., $48) plus your per-mile rate ($.08). AZ, CA, GA, IL, OH, OR, TX 30-40%, on average
Milewise® from Allstate Milewise uses a plug-in device and the Allstate app. With this program, Allstate sets a base daily rate for you (e.g., $1.50), then adds that to your per-mile rate (e.g., $.06) to arrive at your coverage cost. AZ, DE, FL, ID, IL, IN, MA, MD, MN, MO, NJ, OH, OK, OR, PA, SC, TX, VA, WA, WV, WI 20-72%, on average
SmartMiles® from Nationwide SmartMiles sets a monthly base rate (e.g., $60) plus a per-mile rate (e.g., $.07), which Nationwide tracks using a small device. Like Metromile, SmartMiles waives all miles over 250 on any given day. AR, AZ, CO, CT, DC, FL, GA, IA, ID, IL, IN, KS, KY, MD, ME, MI, MN, MO, MS, MT, ND, NE, NH, NM, NV, OH, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY As an example, Nationwide says someone who might pay $133 a month with traditional coverage from them could pay $95 with SmartMiles.
Root Insurance Although technically not pay-per-mile insurance, Root works similarly. It uses your phone to track your driving, including miles per month and behavior and sets your premium accordingly. AZ, AR, CA, CO, CT, DE, GA, IL, IN, IA, KS, KY, LA, MD, MS, MO, MT, NE, NV, NM, ND, OH, OK, OR, PA, SC, TN, TX, UT, VA, WI, WV Up to $900 a year

Is pay-per-mile car insurance cheaper?

Pay-per-mile insurance may be a cheaper option for policyholders who don’t drive frequently. However, if you find yourself traveling a lot in a given month, your premium could be high for that period. To decide whether pay-per-mile makes sense for you, it may be helpful to calculate how much you’d pay for pay-per-mile insurance annually or on average. You can estimate your monthly premium by determining your company’s base and per-mile rates, along with the number of miles per month that you drive. The following formula is one way to estimate your monthly premium:

Your monthly base rate + (Average miles driven per month × per-mile rate)

Consider the example that Nationwide provides on its SmartMiles® website. A SmartMiles® policyholder is given a $60 base rate. In addition to the base rate, the policyholder would pay $.07 per mile driven that month. The policyholder drives 500 miles in a month. Plug these numbers into the formula:

Your monthly base rate: $60 + (Average miles driven per month: 500 x per-mile rate: $.07)

Altogether, the $60 base rate plus the per-mile fee results in a grand total of only $95 per month for car insurance, much lower than Nationwide’s average monthly cost of $133 for a traditional policy, according to the company’s website.

Who is pay-per-mile insurance best for?

As a general rule of thumb, the biggest reason to consider car insurance by the mile is if you drive infrequently. Here are a few key groups of drivers that might save the most with pay-as-you-go car insurance.

People who work from home

If you are a remote worker, you are probably not covering nearly as many miles as the average commuter, which means you might save with insurance by the mile.

Just keep in mind that if you switch your coverage and then have to go back into the office, you could end up paying more if you keep your pay-per-mile insurance policy.

People who have another primary mode of transportation

Perhaps you own a car, but you primarily use a bike or public transport to get around. You may be able to save by switching to pay-as-you-go car insurance if your car isn’t getting much use.

People who attend college

If you’re looking for car insurance for college students, pay-per-mile might be a good option. Many students go to college and leave their vehicles behind, which means the vehicle may temporarily go completely unused. Some companies offer a distant student discount for this situation, but pay-per-mile coverage could be a good alternative to consider. Even if you have a vehicle at school that you use very rarely, if you primarily walk your campus, pay-per-mile insurance might help your college insurance budget go further.

People who have a second vehicle rarely used

Multi-car insurance policies aren’t your only option if you have more than one vehicle. If you have more than one vehicle, you might find yourself driving one more often than the other. Your second vehicle might benefit from pay-per-mile insurance. Drivers with pleasure vehicles — cars that are only driven occasionally — might save money by signing the second vehicle up for a pay-per-mile program, which may cost less than adding a second vehicle to your existing auto insurance policy.

Frequently asked questions

Can I pay in full for a pay-per-mile policy?

In most cases, it is unlikely you can pay in advance, as your premium is calculated on real-time mileage. While each company will have its own guidelines, most are likely to require a monthly billing cycle with pay-per-mile policies. This helps to ensure that you are only paying for the miles you drive in that month. If your insurer lets you pay your policy in full, you might have to pay more or would have to wait for a refund if you drive more or less than was expected.

How do car insurance companies track my mileage?

Most companies have an app or plug-in device that you must use to qualify for pay-per-mile insurance. This will calculate the number of miles you drive. Some companies may ask you to self-report your mileage by taking a photo of your odometer or filling out a form online. If you are asked to fill out a form, you will likely have to attest that the information is true. If you provide false information, your policy could be canceled for fraud.

What is considered low mileage?

Most insurance companies view anything less than 10,000 per year as low mileage. Other carriers use a daily calculation, viewing drivers who drive less than 3 to 5 miles one way to work or school as low mileage drivers.

What happens if my driving habits change?

If you have signed up for pay-per-mile car insurance and your schedule changes, which causes you to drive more, you may want to consider switching back to a traditional policy. Talking to your insurance company and getting a quote for a regular policy could help you decide if pay-per-mile coverage is still saving you money. Reevaluating your car insurance needs periodically is a great way to make sure you’re getting the right coverage in general. After a move, purchase or lifestyle change, you may realize you need roadside assistance, gap insurance or new car replacement coverage.

Written by
Lizzie Nealon
Insurance Writer
Lizzie Nealon is a former insurance writer for Bankrate. Her favorite part of the job is making home, auto and life insurance digestible for readers so they can prepare for the future.
Edited by
Insurance Editor
Reviewed by
Assistant Vice President & Claims Field Manager