Is Pay-Per-Mile Insurance A Better Deal?

Written by:

Dash Lewis , Writer

Written by: Dash Lewis Content Writer

03/27/2024 09:59 PM

Key Points:

• Pay-per-mile car insurance is a great way to save money on auto coverage if you drive 12,000 or fewer miles per year.
• Metromile is an excellent pay-per-mile insurance provider, but it’s only available in eight states.
• Nationwide and Allstate offer quality pay-per-mile options that are more broadly available than Metromile.

Plenty of car insurance companies reward customers for practicing safe driving habits and driving less, but if you’re not behind the wheel that often, you may be able to save more money with a pay-per-mile insurance policy.

In this article, we’ll lay out what pay-per-mile insurance is, how much you can save, and when you may want to consider usage-based auto coverage. We’ll also give our top picks for the best car insurance companies that offer pay-per-mile insurance, such as Metromile.

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What Is Pay-Per-Mile Insurance?

Pay-per-mile insurance sets drivers’ car insurance rates based on how many miles they drive. This makes it a great option for low-mileage drivers, students who are away at school without their vehicles, and people with a second car that rarely goes on the road.

With pay-per-mile insurance, sometimes called pay-as-you-go coverage, drivers can pick a basic liability policy, full-coverage car insurance (which includes liability, collision, and comprehensive coverage), medical coverage, and even add-ons including roadside assistance.

Usage-Based Insurance

Pay-per-mile insurance falls into the category of usage-based insurance. Usage-based insurance differs from a traditional policy because it relies on data collected from your car via a device or mobile app. That data is then shared with the insurer, who bills you a customized rate per mile.

Many companies offer usage-based programs that are slightly different from a pay-per-mile policy. Rather than track the number of miles you drive and charge you a standard rate, it will monitor your driving habits and evaluate your behavior on the road. These programs look at a combination of things to create a monthly bill, including:

• Speed and acceleration
• Mileage
• How frequently you drive
• Cell phone usage while driving
• Hard braking
• Time of day you drive

Enrolling in a usage-based program that tracks your habits can give you steep discounts on your auto insurance policy, but rates aren’t set using these metrics as they are with pay-per-mile coverage.

How Does Pay-Per-Mile Auto Insurance Work?

So, how will your insurer know how many miles you drive? There are a number of ways companies can track your vehicle use. Some use telematics devices that attach to your vehicles via a port or the dashboard. Others allow you to use a mobile app that tracks mileage. Sometimes, depending on the auto insurer, just a photo of your odometer will suffice.

Drivers with pay-per-mile insurance are charged a monthly base rate that’s determined based on factors such as the type of car you drive, your credit score, where you live, and your driving record. On top of that, you’ll pay a per-mile fee, which is usually a few cents per mile.

For example, let’s say you take out a pay-per-mile insurance policy with a base rate of $25 per month and your per-mile fee is 5 cents. If you were to drive 300 miles in a month you would pay a total of $40. The next month, your base rate stays the same, but if you only drive 150 miles, you’ll pay a total of $32.50.

Some insurers provide a mileage cap that limits the number of miles you can be billed for over the course of a day. Metromile caps its policies at 250 miles a day, or 150 miles if you live in New Jersey. A mileage cap allows policyholders to avoid financial surprises and take longer drives if necessary, such as on a road trip, without building up a massive bill.

How Much Can You Save With Pay-Per-Mile Insurance?

The amount of money you can save with pay-per-mile insurance depends on how much you drive. Metromile boasts how it can save a motorist who drives less than 10,000 miles a year $741 annually on car insurance.

However, many insurance companies offer stackable discounts that make their policies more affordable. Sometimes, being eligible for multiple discounts can save you more money than opting for pay-per-mile insurance. The only way to know for sure is to compare multiple quotes from insurers.

We recommend getting quotes from at least three providers in your area. Then, depending on the average number of miles you drive, compare whether pay-per-mile insurance would be cheaper.

Pay-Per-Mile Car Insurance: Our Take

The average American drives approximately 13,500 miles annually, according to the U.S. Department of Transportation’s Federal Highway Administration. So, if you fall below the national average, a pay-per-mile insurance policy could save you money.

Groups that tend to drive the least and that therefore may want to check out pay-per-mile insurance include:

• People who work remotely
• People with more than one car
• People with access to dependable public transportation
• College students
• Retirees

If you commute 30 minutes each way to work every day, a pay-per-mile policy may not be right for you. However, if you work from home, walk to the office, or have access to public transit, it could be worth the switch.

Our Recommendations For Pay-Per-Mile Car Insurance

Not all major car insurance companies offer pay-per-mile insurance. It’s also not available in every state. When trying to find the best auto insurance policy for you, we recommend comparing rates from multiple providers. If you’re trying out a usage-based policy for the first time, going with a larger provider like Nationwide or Allstate can make switching back to a traditional insurance policy easier if it isn’t the best fit.

Metromile

If you’re a low-mileage driver and happen to live in one of the eight states that Metromile operates in, the young Silicon Valley upstart could be a good option for you. In addition to liability and full-coverage policies, the company also offers rental car reimbursement and roadside assistance. Metromile is available in Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington.

Check out our Metromile review to see if the company’s coverage options work for you.

Nationwide: SmartMiles

Nationwide has one of the largest reaches when it comes to pay-per-mile insurance. Its SmartMiles^® program is available in 44 states, has a cap of 250 miles per day, and rewards good drivers with a 10 percent safe driving discount. Nationwide is rated at an A for financial strength from AM Best and has another A+ rating from the Better Business Bureau (BBB).

Learn more about the company’s coverage options in our Nationwide auto insurance review.

Allstate: Milewise

Milewise^® is Allstate’s usage-based insurance option. It tracks your car’s mileage and driving habits with a device that’s installed under the dash and steering column of your vehicle. The program is only available in the following 16 states: Arizona, Delaware, Idaho, Illinois, Indiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia, Washington, Wisconsin, and West Virginia.

Read our Allstate insurance review to see what insurance options you might qualify for.

Pay-Per-Mile Car Insurance: FAQ

Below are some frequently asked questions about pay-per-mile car insurance:

How We Rate Auto Insurers

Our review team extensively researches auto insurance providers to deliver informed and unbiased assessments of leading companies. We evaluate several key rating factors that are important to consumers to determine which providers are the best in the industry:

• Reliability: It’s important that an auto insurer is able to meet its claims obligations. Companies with a strong financial strength rating from AM Best score best in this category. Established insurers with a long history of reliable service also receive positive marks.
• Availability: Insurance companies that offer wider availability to consumers in terms of state availability and few eligibility requirements are more likely to meet consumer needs.
• Coverage: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits like roadside assistance.
• Pricing: Cost can be difficult to compare between insurers because so many factors impact annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we look at insurance rate estimates generated by Quadrant Information Services, discount opportunities, and consumer reports.
• Service: We comb through customer reviews on sites like the Better Business Bureau (BBB) to learn about customer experiences. Insurers with a low volume of complaints score well in this area. We also consider the claims process, giving higher ratings to car insurance providers that offer a smooth experience.
• Technology: Providers with an online quote tool, easy-to-use claims app and a usage-based insurance app score best in this category.

*Data accurate at time of publication.

Dash Lewis Content Writer