Pay-Per-Mile Car Insurance: What You Need to Know
Pay-per-mile car insurance and other usage-based policies may reduce your premium, but only for certain drivers.
If you own a car but rarely drive it (especially during the pandemic), you may be wondering if there is a cheaper car insurance option available in addition to traditional coverage. Pay-per-mile insurance may save you money — up to 40% in some cases — but only if you don't drive frequently.
What is pay-per-mile insurance?
Pay-per-mile car insurance allows you to pay for coverage based on the number of miles you drive. As a result, it's best suited for people who don't drive a lot in the long run.
Some companies specialize in this type of insurance, such as Metromile, while a few large insurers, such as Nationwide, also provide a per mile option. This is not the same as the low-mileage discount offered by some auto insurers. Pay-per-mile car insurance determines your rate based on how far you drive rather than a percentage of your traditional policy.
A type of usage-based insurance is pay-per-mile insurance. Usage-based programs use telematic technology to track your driving habits via a mobile app or a device that plugs into your car's diagnostic port to calculate your personalized car insurance rate.
Usage-based insurance is classified into two types:
- Pay-per-mile, which generates a rate based on the number of miles driven.
- Pay-as-you-drive, also known as pay-as-you-go, generates a rate based on your driving habits. If you have a bad driving record, some programs may raise your rates.
Who should use pay-per-mile car insurance?
Pay-per-mile insurance is best suited for people who don't drive frequently over a long period of time, such as those who:
- Work from home.
- You're in college.
- They don't drive because they take public transportation, walk, or use another mode of transportation.
- Have a second vehicle they rarely use.
According to the Federal Highway Administration of the United States Department of Transportation, Americans drive an average of 13,500 miles per year. However, it is difficult to determine how little driving is required to benefit from pay-per-mile insurance.
According to Mile Auto, a pay-per-mile insurer, if you drive less than 10,000 miles per year, you're probably paying too much for auto insurance. Nationwide notes that if you drive less than 8,000 miles per year, you are most likely to benefit from its pay-per-mile insurance program.
How does pay-per-mile car insurance work?
Pay-per-mile insurance has a base rate that remains constant month after month, followed by a per-mile rate that typically has a cap, such as 250 miles per day.
Your base rate is calculated in the same way that a traditional car insurance quote is. Gender, age, and car make and model are all taken into account when calculating a rate. Despite the fact that your rate is calculated differently, you receive the same coverage as a traditional policy and are not restricted to specific coverage such as liability insurance.
Telematics is used by businesses to track how far you drive. Some programs, such as Nationwide Smartmiles, look at your driving habits to see if you qualify for a discount.
Similarly, Metromile customers in Oregon can earn a discount by using the company's "Ride Along" feature. Through its app, the program tracks your driving for about two weeks. The company will estimate your monthly bill based on the results. Metromile also considers driving habits in Arizona, Illinois, Oregon, and Virginia when calculating your pay-per-mile and base rate at renewal.
If you are not comfortable sharing data, Mile Auto offers pay-per-mile insurance that does not require the use of a plug-in device. Instead, once a month, you must send a photo of your odometer.
Companies that offer pay-per-mile insurance
Company | Estimated savings* | How it works | Where available |
Allstate Milewise | Up to 20% for 10,000 miles |
| AZ, DC, DE, FL, ID, IL, IN, MA, MD, NJ, OH, OR, PA, TX, VA, WA, WV |
Metromile | $741 a year, on average |
| AZ, CA, IL, NJ, OR, PA, VA, WA |
Mile Auto | Up to 30% to 40% over your previous company |
| GA, IL, OR |
Nationwide Smartmiles | Up to 10% for safe driving |
| 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 in which your rate is determined by your driving habits. These programs may raise your car insurance rates if you drive frequently, aggressively, or in the middle of the night.
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 |
| CT, IL, OR, PA, WI |
Progressive Snapshot | $145 per year, on average |
| Available in 48 states and Washington, D.C.; not offered in CA and NC. Sign-up discount not available in AK, HI and NY. |
Root Insurance | Up to $900 a year |
| 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% |
| 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 are not based on usage. Rather than basing your car insurance rate on your driving habits or mileage, these programs use telematics to create a personalized discount or cash back. For example, if your car insurance is $100 per month, you could get a 10% discount through a telematics program if you drive safely.
These programs, such as Allstate's Drivewise, do not directly raise (or lower) your rate. As a result, there is unlikely to be a financial disadvantage. Regardless of whether you participate in these programs, your rates may still rise due to traditional factors such as your driving history and location.
These programs, however, continue to collect data about your driving habits (including hard braking, acceleration, and location), so skip it if you are uncomfortable sharing this information.
Companies that offer telematics reward and discount programs
Company | Discounts offered | How to save | Where available |
Allstate Drivewise |
|
|
|
Nationwide SmartRide | 10% upon initial sign-up and up to 40% depending on your driving habits |
| All states except MA |
Safeco RightTrack | Between 5% and 30%. |
| 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% |
| Not available in CA, MA, and RI |
Telematics tips
Pay-per-mile car insurance or another telematics program will differ from traditional auto insurance in many ways. Before changing policies, make sure to ask the following questions:
- Is there a daily mileage limit for pay-per-mile insurance?
- Is your location being tracked by a plug-in device, an app, both, or something else?
- Is the device or app associated with a specific vehicle or driver?
- What data is being collected?
- What driving habits can help you save money?
- Can your rates increase based on driving behavior?