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

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.

How do car insurance companies track my mileage?

Car insurance companies track your mileage either through a plug-in device you install in your car, through a mobile app that runs in the background on your smartphone or via routine photo requests of your odometer. 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.

What is considered low mileage?

According to the U.S. Department of Transportation, drivers in the U.S. put an average of 13,476 miles on their cars each year. Drivers aged 35-54 have the highest average, at 15,291 annually. Most insurance companies will view anything under 7,500 to 10,000 miles a year as low mileage. If you fit in that demographic, you may benefit from pay-as-you-go car insurance.

What happens if my driving habits change?

If your driving habits shift significantly after signing up for pay-per-mile car insurance, it might be worth reassessing your coverage. For example, if a new job or lifestyle change leads to increased driving, you may find that a traditional car insurance policy better suits your needs. Speaking with your insurance professional and obtaining a quote for a regular policy can help you determine if you're still saving money with pay-per-mile coverage. Periodically reevaluating your car insurance is also a smart strategy to ensure you have the right protection. Major life events, such as moving, purchasing a new vehicle or changes in daily routines, can affect your coverage needs. In these situations, you might also consider adding options like roadside assistance, gap insurance or new car replacement coverage to enhance your policy.

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Should you switch to pay-per-mile insurance?

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How does pay-per-mile car insurance work?

With auto insurance by the mile, your high-risk drivers manage their car insurance budget. With this insurance model, companies generally equip your car with a mileage-tracking device or request routine odometer updates 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.

It’s important to note that if you lease your car or have an auto loan, pay-per-mile insurance may not be accepted by your specific lender.

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 auto insurance by the mile, your coverage 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.

save money.

Where can I buy auto insurance by the mile?

The availability of car insurance by mileage isn’t widespread yet, but it’s gaining in popularity as several 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-as-you-go insurance 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, FL, GA, IL, OH, OR, PA, TN, TX, WI	30-40%, on average
Milewise from Allstate	Milewise uses a plug-in device and the Allstate app. Allstate pay-per-mile sets a base daily rate for you, then adds that to your per-mile rate to arrive at your coverage cost.	AZ, DE, ID, IL, IN, MD, MN, MO, OH, OK, OR, PA, SC, 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.	AL, AR, AZ, AR, CA, CO, CT, DE, DC, FL, GA, IA, ID, IL, IN, KS, KY, MA, MD, ME, MI, MN, MO, MS, MT, ND, NE, NH, NJ, 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, LA, MD, NM, OH, PA, TX, VA	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

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Who should consider pay-as-you-go car insurance?

Anyone who drives fewer miles than the average driver may want to consider pay-as-you-go car insurance. Whatever your situation, if you have a vehicle that spends more time in your garage than it does out on the roads, pay-per-mile insurance could potentially save you money.

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, public transport or rideshare 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.

Is pay-per-mile car insurance cheaper?

The easiest way to find out if pay-as-you-go car insurance may be cheaper for you is to ask for quotes from some of the insurers who offer it as an option to drivers. Benefiting from pay-per-mile coverage is largely situation-based: if you drive very little, you are likely to see savings; if, on the other hand, you are a frequent driver, your rates will probably increase.

One factor to consider is that some of the insurers who offer pay-per-mile coverage cap the daily fees at 250 miles. For instance, if you are retired and rarely drive but do travel by car to Florida from your Connecticut home for the winter, you may still save money since your infrequent long trips will only count for the first 250 miles you drive per day.

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. Let's consider an example. For reference, the average cost of car insurance in the U.S. is $2,278 for full coverage and $621 for minimum coverage. One way to estimate your potential savings with pay-per-mile coverage is to use this formula:

Your monthly base rate + (average miles driven per month x your per mile rate) = your premium rate

Let's say you are given a base rate of $70 for your coverage. Your per-mile rate is $0.08 per mile, and you drive an average of 300 miles a month. Your formula would look like this:

$70 + (300 x $0.08) = $70 + $24 = $94

If you are paying more than $94 a month in this scenario, you could save money by switching to a pay-as-you-go model. If this were you, pay-as-you-go insurance would cost you $1,128 a year, which is well below the national average for full coverage insurance. Moving to a mileage-based policy could save you a considerable sum of money.

Pros and cons of pay-by-mile insurance

No type of insurance is right for everyone, and like other types of insurance, mileage-based coverage has benefits and drawbacks. Here are a few of the factors you may want to consider when you are deciding if it's the right option for your situation:

PROS

You may save a significant amount of money if your driving is limited
You can customize your rate by the number of miles you drive
Mileage-based coverage encourages driving less, which is more environmentally friendly

CONS

Costs will vary; if you drive extensively one month, you will likely pay more
You may not be comfortable with your insurer's ability to track your mileage
Limited availability: not all insurers offer mileage-based insurance, and those that do are not selling policies in all states

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, through a mobile app that runs in the background on your smartphone or via routine photo requests of your odometer. 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.
According to the U.S. Department of Transportation, drivers in the U.S. put an average of 13,476 miles on their cars each year. Drivers aged 35-54 have the highest average, at 15,291 annually. Most insurance companies will view anything under 7,500 to 10,000 miles a year as low mileage. If you fit in that demographic, you may benefit from pay-as-you-go car insurance.
If your driving habits shift significantly after signing up for pay-per-mile car insurance, it might be worth reassessing your coverage. For example, if a new job or lifestyle change leads to increased driving, you may find that a traditional car insurance policy better suits your needs. Speaking with your insurance professional and obtaining a quote for a regular policy can help you determine if you're still saving money with pay-per-mile coverage. Periodically new car replacement coverage to enhance your policy.