Pay-per-mile insurance may help people who don’t drive a lot save on their insurance premiums. Pay-per-mile car insurance only charges you for the miles you drive, adjusting your premium monthly. Insurance companies are embracing the pay-per-mile concept, with more carriers available than ever before. Bankrate has compared and analyzed different pay-per-mile programs to help you decide if this could be the right insurance model for you.

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How does pay-per-mile insurance work?

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. With this insurance model, companies generally equip your car with a mileage-tracking device so they can track how much you are driving and bill you accordingly.

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 may all come into play.
  • 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.

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

While telematics and pay-per-mile insurance both use apps or in-vehicle devices to track your driving, they have different goals. With pay-per-mile coverage, your insurance provider is looking at the distance you drive and charging you a direct per-mile fee. With telematics, the carrier is looking at your general driving habits and adjusting your rates accordingly. Telematics programs often factor in your driving distance, but it’s just one of the metrics they monitor.

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 might help you save money.

Where can I buy pay-per-mile insurance?

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 and are subject to change.

Program and car insurance company How it works Availability Estimated savings
Metromile 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 plus your per-mile rate. AZ, CA, GA, IL, OH, OR, PA, TN, 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, then adds that to your per-mile rate 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 plus a per-mile rate, which Nationwide tracks using a small device. Like Metromile, SmartMiles waives all miles over 250 on any given day. AR, AZ, CA, 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 Nationwide’s sample driver profile features a policyholder who saves 29% compared to traditional insurance.
Noblr by USAA The monthly fixed rate stays the same throughout the policy term unless there is a vehicle, driver or coverage change. Rates are variable and are calculated based on driving habits throughout the month. AZ, CO, IL, IN, LA, MD, MO, NM, OH, PA, TX, VA, WI Individual savings vary by driving habits, including mileage.
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. Some companies, like Nationwide and Metromile, cap daily per-mile fees at 250 miles. This accounts for instances like taking a road trip.

To decide whether pay-per-mile makes sense for you, it may be helpful to calculate how much you would pay for pay-per-mile insurance and compare it to your current rate. You can estimate your monthly cost of car insurance by getting a quote for your monthly base and per-mile rate with a company available in your state. Using this quoted rate and your average monthly mileage, you could use the following formula to estimate your monthly premium:

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

Consider the following example: A policyholder is given a $70 base rate. In addition to the base rate, the policyholder pays $0.08 per mile driven each month. The policyholder drives 500 miles in a month. Plug these numbers into the formula:

$70 + (500 x $0.08) = $110

Altogether, the $70 base rate plus the per-mile fee results in a grand total of $110 per month for car insurance. If this driver currently pays $130 per month for traditional car insurance with the same coverage types, pay-per-mile could be a great choice for their budget.

Is pay-per-mile insurance worth it?

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 don’t drive a lot

Retirees, remote workers, people who can walk to work or part-time workers may be good candidates for pay-per-mile insurance. These drivers are probably not covering nearly as many miles as the average commuter, which means they might save with insurance by the mile.

Just keep in mind that if you switch your coverage and then have to go back to commuting, 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, pay-per-mile insurance might be a cost-saving coverage option.

People who have a second vehicle they rarely use

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

    • Although each company sets its own guidelines, paying in full for the policy period is likely not an option if you choose pay-per-mile insurance. If you have the option to pay in full for the policy period, your monthly amount due will decrease the unused credit amount to pay your premium. At the end of the policy period, you may have to pay more if you drive more miles than anticipated, or receive a refund if you drive less than expected.
    • Car insurance companies track your mileage either through a plug-in device you install in your car or through a mobile app that runs in the background on your smartphone. Regardless of the mileage tracking process, the company will calculate your pay-per-mile insurance rate based on the number of miles driven each month. If the company uses a self-report method, then you will likely have to take a photo of your odometer and may have to fill out a form. You must be truthful in your mileage form, or your policy could be canceled for fraud if you supply false or incorrect information.
    • Although low mileage considerations vary, most insurers consider driving anything less than 10,000 in a year low mileage. If you are considering pay-per-mile car insurance, you may want to see what the insurance company considers low mileage to help you decide if this type of auto insurance is right for you. According to the most recent data provided by the U.S. Department of Transportation, the average annual miles per driver is 13,476.
    • 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 may be a great way to make sure you’re getting the right coverage in general. After a move, big purchase or lifestyle change, you may realize you need additional coverage, like roadside assistance, gap insurance or new car replacement coverage.