Pay-Per-Mile Car Insurance: How Does It Work?
Key Takeaways
- Pay-per-mile car insurance provides savings based on how often you drive.
- Infrequent drivers — such as remote workers, retirees and college students who’ve left their cars at home — might get big savings.
- Not all car insurance companies offer pay-per-mile car insurance, so compare carefully.
What is pay-per-mile car insurance?
Pay-per-mile car insurance (also known as “pay-as-you-go insurance”) is auto coverage that you pay for partly based on how much you drive.
Your mileage is usually kept track of by a device installed in your vehicle or a smartphone app, or your insurance company may request routine odometer reports.
There are two different rates involved in pay-as-you-go car insurance: the base rate and the pay-per-mile rate.
You base rate is the amount you’re charged calculated by looking at factors like:
- The make and model of your car
- Your insurance claim history
- Your age
- ZIP code
Your pay-per-mile rate is based on how much you drive. This rate can be different from month to month. If you drive very little in a month, your premium that month should be cheaper. However, if you drive a lot, you can expect to see higher car insurance rates during that time.
Companies that provide pay-per-mile car insurance offer these cheaper rates based on the idea that if you drive less, you have less of a chance of being in an accident and filing a claim.
Pay-per-mile insurance vs. telematics insurance
Pay-as-you-go insurance is based on how much you drive, while telematics insurance is based on your driving behavior.
With telematics, your insurer tracks your driving habits, including what times of day you drive, how fast you drive and how suddenly you brake.
While the amount you drive may be a factor in some telematics-based car insurance policies, it isn’t the key factor like it is with pay-per-mile insurance.
Should I get pay-per-mile car insurance?
Pay-per-mile car insurance can be a good value if you’re someone who drives infrequently. Drivers who might benefit from pay-per-mile car insurance include:
Remote workers and retirees
If you work remotely or are a retiree, you probably won’t be putting a lot of commute miles on your car.
If getting to and from work isn’t a factor for you, consider pay-as-you-go car insurance to save money. But know that you may have to get a new car insurance quote if you return to commuting.
Drivers with a second mode of transportation
Pay-per-mile car insurance could also benefit you if you often use alternative transport, like biking, carpooling or taking the bus.
If you’re looking for car insurance on a second car that you drive infrequently, pay-per-mile may be a better choice than a multi-car policy. If you’re only taking the second car out for weekend drives, compare how much you would pay for a multi-car policy versus a standard or full-coverage car insurance for your main car and pay-per-mile coverage on the weekend car.
College students
College students are another group that can also benefit from pay-per-mile car insurance — that is if they leave their car at home while attending school out of town.
In fact, pay-per-mile insurance is just one of the ways you can get cheap car insurance as a college student. Many car insurance companies offer discounts to students, not just for storing their vehicles while off at college, but also for good grades and other factors.
Compare a standard car insurance policy with the discounts you qualify for against a pay-per-mile car insurance policy and see which offers the greater savings.
Other occasional drivers
So long as you’re not putting a lot of miles on your odometer, pay-per-mile car insurance could be a good option for you.
According to the Federal Highway Administration (FHA), the average American drives 13,476 miles a year. Car insurance companies have different mileage limits needed to qualify for a pay-as-you-go policy.
If you’re not sure how much you drive in a month, try out any of the smartphone apps (both free and paid) that track your mileage. If that number is equal to or more than the national average, pay-per-mile car insurance is unlikely to be worth it.
How do I get pay-per-mile car insurance?
You can first check to see if your current car insurance company offers pay-per-mile policies. If it doesn’t, other insurers that do have it include:
- Allstate
- Metromile
- Mile Auto
- Nationwide
Not all of these companies may offer coverage where you live, but at least one of them might, so check thoroughly. You should also look at what other car insurance discounts you’re interested in to get the best savings.
Once you’ve picked a car insurance company that offers the best combo of cost and coverage for your situation, call an agent or go online and fill out the online form.
Be sure to have the following information handy:
- Personal information, like your name, address and drivers license number
- The make and model of your car, as well as its license number and VIN number
If the amount you drive ends up increasing after you get pay-per-mile car insurance and you want to return to a traditional policy, take the opportunity to compare car insurance quotes to get the best deal you can.