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If you do not use your car often, whether you are retired, work from home, live close to school or work, or for any other reason, pay-per-mile insurance may be right for you. Pay-per-mile car insurance only charges you for the miles you drive, adjusting your premium monthly. Insurance companies charge a monthly base rate plus a per mile rate for each mile driven.
Insurance companies are embracing the pay-per-mile concept, with more carriers available than ever before. Bankrate has compared and analyzed dozens of carriers that offer it to help you decide if this is right for you and find the company with the best pay-per-mile insurance policy options available.
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 and are subject to change.
|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, 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 (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, 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||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. Some companies, like Nationwide and Allstate, cap daily mileage at 250 miles 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’d pay for pay-per-mile insurance annually or on average. You can estimate your monthly cost of car insurance by determining your company’s base and per-mile rates, along with the number of miles per month that you typically 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.