What is pay-per-mile car insurance?

If you’re looking for the best car insurance if you don’t drive much, insurance by the mile may be right for you. 

Being on the road less lowers your risk of being in an accident, so some companies allow drivers to pay for insurance by the mile. This could lower your monthly car insurance rates, but only if you truly drive infrequently. 

Here’s what you need to know about pay-per-mile auto insurance. 

What is pay-per-mile insurance?

Pay-per-mile car insurance, also known as pay-per-use car insurance, is the option to pay for coverage based on how many miles you drive. It is a low-miles car insurance plan, best suited for those who don’t drive regularly. 

While different from usage-based car insurance, it relies on a similar concept of tracking your miles via a device to calculate your premium. 

Car insurance by the mile is calculated with a base rate as the initial cost, typically averaging between $0.02 and $0.10. Then, the company adds a prorated rate based on the number of miles you drive per month.

Like most insurance premiums, the base rate is calculated based on the driver’s primary characteristics. These include:

•  Age
•  Gender 
•  Location
•  Vehicle make and model
•  Past driving record 

If you’re a high-risk driver, pay-per-mile car insurance gives you flexibility in your overall rates as the total cost may fluctuate with the number of miles you drive.

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How does pay-per-mile car insurance work?

The insurance company will typically give you a smart device to plug into your car’s onboard diagnostics (OBD-II) port. This is the same port used to find issues with your vehicles at a mechanic. 

Once installed, the device will share data with your insurance company to show exactly how much you drive each month.

Some insurers offer alternative options where you can use a smartphone app to measure your mileage and driving behavior. You may also have the option to submit a picture of your mileage counter each month to determine your rates.

Because this is a relatively new car insurance option, most companies require customers to drive a vehicle from 1996 or later to be compatible with the mileage device. Some hybrids and electric vehicles are incompatible, so it’s best to check with your insurer before switching. 

Who should use pay-per-mile car insurance?

Auto insurance by the mile is the best car insurance if you don’t drive much. It is also good for people who want more transparency in their car insurance prices and for those who track their mileage religiously. 

Others who may benefit from using car insurance by the mile include:

• Students who drive less due to the convenience of living on campus 
• Remote workers without a commute 
• Those who have additional methods of transportation 
• Retirees who no longer drive to work looking for discount car insurance for seniors

Pay-per-mile car insurance allows you to control the amount you pay for coverage, making it an attractive option for those who want more clarity in their auto insurance plans. 

Which car insurance companies provide pay-per-mile coverage?

There are different options available for pay-per-mile auto insurance that may work for your budget and needs. Here’s a roundup of popular companies that offer car insurance by the mile.

Metromile

Metromile offers pay-per-mile car insurance, and your bill is divided into two parts: the monthly base rate and a per-mile rate. Because of this, your monthly bill may change depending on how much you drive.

Your base rate is determined by your driving profile. The “Metromile Pulse” device attaches to your odometer and tracks your mileage to determine your rates. The company also offers an app integration that allows you to view your record and monthly bill estimate. 

For added value, Metromile comes with a daily cap. After driving 250 miles (150 in New Jersey) in a day, there is no extra charge. 

Metromile offers coverage to Arizona, California, Illinois, Oregon, New Jersey, Pennsylvania, Virginia, and Washington residents. 

Esurance

Esurance only sells pay-per-mile car insurance to Oregon drivers at this time. For everyone else, it offers an alternative program called DriveSense that includes pay-per-mile options. 

Along with being an alternative to insurance by the mile, DriveSense’s main goal is to give personalized discounts based on driving habits. It is similar to pay-as-you-go car insurance in that Esurance calculates your rates based on how many miles you drive, but you can receive additional discounts for safe driving.

Esurance by Allstate pay-per-mile utilizes a mileage tracking device that will monitor your braking habits, acceleration, and deceleration to determine your monthly rate.

It’s important to note that your monthly car insurance rates will not increase for unsafe driving habits, like abrupt braking or accelerating too quickly, but you can receive discounts for keeping these to a minimum.

Nationwide Smartmiles

Nationwide Smartmiles pay-per-mile program is geared toward low-mileage drivers, and rates are a sum of the base rate and rate per mile. It offers a safe driver discount of up to 10%, with an in-car device that counts miles and tracks your driving habits, such as braking, acceleration, speed, and deceleration. 

Nationwide Smartmiles is available in 40 states and the District of Columbia. However, unsafe driving habits may be penalized with this plan, which can raise your monthly rates. Consider your driving habits and compare different pay-per-mile insurance companies when deciding which premium will work for you. 

Allstate Milewise

Allstate Milewise provides full coverage pay-per-mile car insurance in 21 states. For people who drive less than 13,000 miles a year, it offers valuable savings and additional discount options. 

Allstate pay-per-mile uses a daily base rate and mileage rate to calculate your premium, and your miles are tracked via a plug-in device with a mobile app for convenience. Drivers must keep a credit card on file for payment, as charges are assessed after each trip. 

Hugo Insurance 

Hugo pay-per-mile car insurance calculates your premium by combining a daily and per-mile rate. It doesn’t offer additional discounts but utilizes micropayments and on-demand coverage. These allow drivers to pay for insurance only when they need it and can add to your overall savings.

While their “pay-only-when-you-need-it” insurance model is noteworthy, it can present some potential risks to drivers. For example, turning off your insurance in a public area or while parked could leave your vehicle unprotected from unexpected accidents. 

Hugo is a new option on this list, and its coverage options are more limited. Currently, it only offers liability insurance in nine states  California, Georgia, Alabama, South Carolina, Florida, Illinois, Ohio, Indiana, and Tennessee.

Mile Auto

Mile Auto offers coverage to Ohio, Arizona, Georgia, Oregon, Illinois, Tennessee, Pennsylvania, Texas, and California. Premiums are calculated with a low base rate and a per-mile rate. They offer additional discounts for safe driving habits, students, and seniors. 

Mile Auto allows drivers to send in the number of miles driven at the end of the month by taking a picture of their odometer instead of using a plug-in device.

Noblr by USAA

Noblr assesses your fixed monthly rates based on your primary characteristics, such as age, gender, and driving record. Then it determines the monthly variable rate based on how much you drive and adds it to your total cost. 

The Noblr app breaks down your variable write via five characteristics: 

• Smoothness
• Focus
• Road choice 
• Time of day
• Mileage 

This allows drivers to receive a premium that reflects their driving habits, as well as low mileage and encourages transparency. 

Noblr provides auto insurance by the mile to Arizona, Ohio, Colorado, and Texas residents and relies on an app to track how much you drive.

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What to Consider When Choosing Car Insurance by Mileage

Pay-per-mile car insurance may seem like the perfect option for low-mileage drivers, but there are more things to consider when choosing your plan. 

According to the U.S. Department of Transportation’s Federal Highway Administration, the average American drives around 13,500 miles a year. You need to drive significantly less than this to save money with insurance by the mile. 

Companies that offer pay-per-mile premiums typically charge cents for each mile driven, but this can add up quickly. For example, you’re most likely to benefit from the Nationwide Smartmiles program if you drive less than 8,000 miles per year.

Here’s what you should keep in mind when deciding if pay-per-mile auto insurance is right for you:

• Low-mileage driving may not be enough to secure a significant discount on your premium with pay-per-mile auto insurance.
• Your monthly rates can vary dramatically depending on how much you drive. This may result in upfront savings, but your annual premium could still outweigh your previous monthly rates if you underestimate your mileage. 
• If your current insurer does not offer pay-per-mile car insurance, you may have to look for an entirely new provider to qualify for the low-mileage discount.

Underestimating the number of miles you drive each month could result in a surprisingly high bill with pay-per-mile auto insurance. 

To combat this, consider tracking your miles before opting for a pay-per-mile plan so you have a better estimate of your rates. Some companies like Metromile will track your miles for up to two weeks so that you can calculate your potential monthly payment before committing to their program. 

If pay-per-mile car insurance is not the right fit for you, another option is to ask your insurer about a low-mileage car insurance discount instead.

How much can I save with pay-per-mile insurance? 

The amount you can save will vary based on your driving behavior and primary characteristics. You should compare car insurance quotes to estimate the most accurate savings. You may also be able to secure additional savings by purchasing the minimum amount of liability insurance with a pay-per-mile plan, but this will depend on the state you reside in. 

Like most insurance policies, your monthly insurance rates are calculated based on factors like gender and age. Some companies will also consider driving habits to determine if you are eligible for additional discounts. 

Metromile suggests that the average driver would need to drive less than 26 miles a week to take full advantage of pay-per-mile auto insurance.

Final Thoughts on Pay-Per-Mile Insurance 

Pay-per-mile car insurance can provide significant savings to many drivers, but exactly how many miles per month results in worthwhile savings depends on your situation. 

For drivers who want more control over how much they spend on car insurance, pay-per-mile plans may benefit you. 

Many companies provide low-mileage car insurance options, and you should shop around for the best available in your state.

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