What is Pay-Per-Mile Car Insurance and Can it Save You Money?

If you drive infrequently, or have a second car you don’t use very often, pay-per-mile car insurance might save you some money.
Last updated Sept. 26, 2022 | By Kate Daugherty | Edited By Mindy Woodall
A green mile marker on an empty road.

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Pay-per-mile auto insurance is geared toward people who don’t drive very often, or who have second cars they don’t use much. If you drive less than 10,000 miles per year, pay-per-mile insurance could potentially save you some money. According to some insurers, customers can save up to 47% compared to what they would pay for traditional car insurance policies.

This type of insurance isn’t for everyone. You won’t save any money on a pay-per-mile policy if you drive a lot, and some people have privacy concerns about the telematics device the insurance providers use to gather your driving data. But for the right drivers, pay-per-mile could be a money-saving hack.

In this article

What is pay-per-mile car insurance?

Pay-per-mile car insurance is based on the number of miles you drive, rather than on a standard six-month or annual premium rate. If you drive fewer than 10,000 miles per year, it may be worth investigating pay-per-mile policies to save money on car insurance, especially if you don’t spend much time on the road.

Most pay-per-mile options require you to install a device under the steering column of your car that tracks your mileage every time you drive. Some companies require that you send a monthly photo of your odometer through their app.

Once the company verifies how many miles you’ve driven, it will calculate your monthly payment using an established base rate plus a per-mile rate. If you go on a road trip, or have a period of driving more than usual, your daily mileage will be capped at 250 miles.

Is pay-per-mile the same as a low-mileage discount?

No. Pay-per-mile insurance shouldn’t be confused with some companies' discounts for low-mileage drivers. Low-mileage discounts are calculated as a percentage of your standard insurance premium and are based on a threshold of annual miles, usually around 8,000.

The pay-per-mile insurance option is based on the exact number of miles you drive. If you drive fewer miles per month, then you’ll see savings. But if you increase your mileage, your bill will go up as well.

Some pay-per-mile insurance companies offer additional discounts as well, such as for being a safe driver or renewing your policy after the first year. But your overall insurance costs are based on how much you drive.

How does pay-per-mile car insurance work?

Pay-per-mile car insurance works by using telematics, a method of collecting data about your driving habits. Many companies rely on data collected through a small device installed in your onboard diagnostic port (OBD-II), usually found under the steering column of cars manufactured after 1996.

Based on the gathered data, the car insurance company can tell how far you’ve driven each month as well as your driving habits, like braking too hard, speeding, or accelerating too quickly.

Once the insurance company verifies your driving information, it calculates your monthly rate. The amount you pay each month is made up of a base rate that stays the same over the length of your policy, plus a per-mile rate applied based on the number of miles you’ve driven.

How do you get the bill?

Some companies will send you a bill detailing the previous month’s mileage and total. Other companies, like Allstate, will ask you to make an initial deposit and then deduct your mileage and base rate from that amount. When you hit a minimum-required account balance, your linked credit or debit card will automatically be charged to replenish the deposit amount.

There are various factors that affect your car insurance rates with pay-per-mile insurance, not just how far you travel each month. The base rate varies from person to person, and from company to company. Your insurance rate is also affected by factors like your age and gender, the make and model of your car, your driving history, and often even your credit history.

Who is pay-per-mile car insurance for?

A pay-per-mile insurance policy can be a financially sound choice for some people. If you work from home, live in a walkable city, or just don’t use a car much to get around, then you could benefit from pay-per-mile insurance.

Similarly, if you have a second vehicle that you don’t drive much, or if you’re away at school and your car stays parked in a garage for a good portion of the year, then a pay-per-mile policy might help save you money. When you primarily pay for what you use — or rather, don’t use — your insurance rates could go down.

Pay-per-mile insurance isn’t for everyone.

According to the Federal Highway Administration, the average American drives 13,476 miles annually. If you drive that many miles or more each year, then you’ll be better off with a standard, unlimited mileage policy rather than trying to manage a pay-per-mile policy.

Even if you drive less than the national average, your mileage might still be too high for pay-per-mile insurance. The pay-per-mile policies are usually most effective for people who drive well under 10,000 miles a year.

Pay-per-mile car insurance availability

Several car insurance companies, including some well-known names, offer pay-per-mile policies. Like with any new policy, it's always worth getting multiple insurance quotes and comparing coverage types before you commit.

Allstate

Allstate offers the Milewise program, which gives customers the option of either a pay-per-mile or unlimited miles policy while using their telematics device. Pay-per-mile customers pay a low daily base rate plus a per-mile rate, while unlimited customers pay a higher daily base rate.

The Milewise tracking device pairs with the Milewise app, which tracks your miles and driving behavior. The app will provide feedback on your driving and record your monthly mileage.

The Milewise program is available in 25 states:

  • Arizona
  • Delaware
  • Florida
  • Idaho
  • Illinois
  • Indiana
  • Maryland
  • Massachusetts
  • Minnesota
  • Missouri
  • New Jersey
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • South Carolina
  • Texas
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin

Nationwide

The Smartmile program through Nationwide works with a telematics device installed under your car's steering column that pairs with the Smartmile app. The set base rate plus cost per mile combine to create your monthly bill.

In addition to potential pay-per-mile savings, you may also be eligible for a 10% discount after renewing your policy for the first time. Nationwide, among other companies, also offers a road trip exception, where you are only charged for the first 250 miles per day rather than your total mileage.

Smartmile is available in all states except these:

  • Alaska
  • Hawaii
  • Louisiana
  • North Carolina
  • New York
  • Oklahoma

Metromile

Metromile offers pay-per-mile insurance through a device (called the Pulse) and a mobile app, just like Nationwide and Allstate. But Metromile’s app tracks other car-related data as well.

According to its website, you can use the Metromile app to follow your car’s health and receive notifications that might help you avoid street-sweeping tickets. The app could even help you find a lost or stolen vehicle.

If you drive fewer than 10,000 miles per year (or 27 miles per day), you might save money using Metromile’s services. Metromile also offers additional discounts for things like safe driving, anti-theft devices, or bundling multiple policies.

Metromile is available in eight states:

  • Arizona
  • California
  • Illinois
  • New Jersey
  • Oregon
  • Pennsylvania
  • Virginia
  • Washington

Mile Auto

Instead of requiring customers to install a device in their car, Mile Auto has you take a photo of your odometer through its app and submit your mileage information monthly. The Mile Auto app confirms your vehicle data is correct and that the photo is authentic (no cheating). The app compares the photo to previous photos to verify your monthly rate.

Mile Auto offers liability coverage based on state requirements, as well as collision and comprehensive insurance. You can also add rental car insurance and roadside assistance coverage, options which are available for an extra charge.

Mile Auto is available in eight states:

  • Arizona
  • California
  • Georgia
  • Illinois
  • Ohio
  • Oregon
  • Pennsylvania
  • Texas

Saving money with pay-per-mile car insurance

Before you start wondering how to switch car insurance to pay-per-mile coverage, let’s look at what you might pay each month.

Remember that your base and per-mile insurance rates are calculated using several factors, and the following are just examples. Your cost per month will vary based on your monthly mileage.

Metromile example

Metromile’s lowest monthly base rate is $29 and its pay-per-mile rate is $.06. If you drive 500 miles per month, then your monthly bill will likely be $59 per month ($29 + (500 x .06) = $59).

If you drive closer to 850 miles a month (roughly 10,000 miles a year), your monthly rate using the numbers above would be $80 ($29 + (850 x .06) = $80).

Consistently driving 850 miles per month for more than six months will likely cost $480.

Allstate Milewise example

The Allstate Milewise program uses a daily base rate in addition to a per-mile rate.

Assume your daily rate is $1.50 and your per-mile rate stays at $.06. If you drive 15 miles per day, your daily insurance rate will be $2.40 ($1.50 + (15 x .06)= $2.40).

If you consistently average 15 miles a day (commuting to work and running errands on the weekend), then your monthly rate could be $72.00 for 450 miles, or $432 every six months.

Warning
Heads up that Allstate Milewise charges the standard base rate on days you don’t drive. So you won’t get a free-car insurance day if you stay home.

FAQs about pay-per-mile car insurance

Is pay-per-mile car insurance worth it?

It depends on how much you drive. If you don’t drive very far, or very often, then pay-per-mile insurance can be a cost-saving option for car insurance. But if you drive more than 10,000 miles per year, then you’re probably better off with a traditional policy. 

How do insurance companies keep track of mileage?

Some companies use telematics devices installed under the car's steering column, which reports back to an app downloaded to your phone.

If you’re wary of sharing your data or having your every driving move tracked, then you might prefer Mile Auto. Mile Auto does not require an installed device. Instead, you take a photo of your odometer each month through the mobile app.

Does a pay-per-mile plug-in device drain your car battery?

There have been reports of some telematics devices draining the batteries in cars. Users may need to get a cigarette lighter adapter to power the telematics device rather than using the car’s battery.

According to Allstate, its plug-in device has an internal battery and a sleep mode to help reduce battery drain. Metromile says its Pulse device should have little to no effect on a healthy car battery. 

Bottom line

Pay-per-mile car insurance may not be useful for everyone, but if you’re part of the population that drives fewer than 10,000 miles a year, then it could be a practical option.

It's still important to get multiple quotes, compare rates, and understand the fine print before signing up for a new car insurance policy, including a pay-per-mile option.

Check out our other car insurance articles for more policy options, especially if you’re looking for the best car insurance out there.

  • You could save up to $500 with some companies
  • Compare dozens of providers in under 5 minutes
  • Fast, free and easy way to shop for insurance
  • Quickly find the perfect rate for you

Author Details

Kate Daugherty Kate Daugherty is a freelance writer based in Denver, Colorado. She specializes in personal finance, grant writing, and senior health.