Should You Switch to Pay-Per-Mile Car Insurance?
People who don't drive every day can save with pay-per-mile insurance, but it comes with a few trade-offs compared to a traditional auto insurance policy.
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Pay-per-mile car insurance changes in price each month based on how much you drive.
Because you're only paying for what you use, it can help you save money if you only drive occasionally. But if you have a long daily commute, you’ll probably pay more than you would with a regular policy.
And if the amount you use your car changes a lot from month to month, you might find that the added stress that comes with an unpredictable car insurance bill might not be worth saving a few dollars per month.
Who should switch to pay-per-mile car insurance?
Pay-per-mile auto insurance can be cheaper than regular car insurance if you drive less than 1,250 miles per month.
That's around 40 miles per day.
For example, in Oregon, if you drive 500 miles per month, a pay-per-mile policy from Lemonade or Mile Auto is cheaper than a traditional car insurance policy from State Farm, but about the same price as Progressive.
The threshold of when it's a good deal for you will depend on the many factors that affect your car insurance rates, like the age of your car and how often you drive.
Monthly car insurance rates of pay-per-mile vs. a standard policy
Monthly mileage | Lemonade | Mile Auto |
Standard insurer
|
|---|---|---|---|
| 500 miles | $78 | $52 | $104 |
| 1000 miles | $111 | $71 | $104 |
| 1500 miles | $145 | $90 | $104 |
Monthly rates are for a full coverage policy in Portland, Oregon, for a 30-year-old single male driver of a 2018 Subaru Outback.
Quotes can vary widely, but the rule of thumb is that people who drive very little will get the best deal with pay-per-mile car insurance. For example, if you have a short commute and only drive 500 miles per month , you could save 38% by choosing pay-per-mile auto insurance.
But if you drive more than 1,250 miles or more per month , you'll pay more for a per-mile policy than regular car insurance.
And if you drive around 1,000 per month, you might save a few dollars each month, but you’d have to live with the other disadvantages of pay-per-mile insurance.
Other drawbacks to pay-per-mile
Besides the possibility of higher costs, pay-per-mile has a few extra complications compared to a regular auto insurance policy:
- Your insurance bill changes month-to-month, which could make it harder and more stressful to plan your monthly budget.
- You're required to use a car plug-in device to track your driving, or manually report your mileage every month.
- Many insurance companies offering pay-per-mile are fairly new. They don't have a long track record of stability, and may not have the same level of service or financial stability as a traditional insurance company.
- Pay-per-mile insurance programs aren't available in all states.
Is pay-per-mile worth it?
Using a pay-per-mile car insurance service can be a good deal if you don't drive much.
If the number of miles you drive is average or high, you can save on car insurance by comparing rates from the cheapest companies and looking out for other discounts, like bundling or professional affiliations.
How does pay-per-mile car insurance work?
Pay-per-mile car insurance charges a per-mile fee, plus a monthly base price. It's also called pay-per-use car insurance, and your monthly bill will change based on how much you drive.
- You'll pay a base rate each month, which is set using factors like your age, vehicle and driving record. The base rate is usually $30 a month or higher.
- You'll usually pay a few cents per mile. For example, if you drove 200 miles per month at 4 cents per mile, you would be charged $8 for mileage, plus your base rate.
- To prevent high bills from an occasional long road trip, there's a daily mileage cap. Most pay-per-mile insurance companies stop counting miles driven after you hit 250 miles in a day.
Insurance companies will typically use a small device installed in your car to count your miles. Pay-per-mile plans are ideal for drivers looking for affordable car insurance but don't drive frequently.
Companies that offer pay-per-mile car insurance
Currently, only a few insurers offer a pay-per-mile car insurance policy, and it's only available in about half the U.S. Common choices for pay-per-mile car insurance include Lemonade, Allstate, Nationwide and Mile Auto.
Company | Availability | |
|---|---|---|
| Lemonade | AZ, OR, WA |
| Allstate Milewise | 21 states |
| Nationwide SmartMiles | Every state except AK, HI, LA, NC, NY and OK |
| Mile Auto | AZ, FL, GA, OH, OR, TN, TX |
If pay-per-mile car insurance isn't available near you, you may be able to use a low-mileage car insurance discount to lower the cost of a traditional car insurance policy by up to 20%.
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How pay-per-mile differs from telematics insurance
Many insurance companies offer a form of insurance that’s similar to pay-per-mile, known as telematics or usage-based car insurance.
These kinds of insurance programs look at your driving habits to set rates. The less often you do things like break the speed limit, slam on the brakes or drive late at night, the lower your rates will be.
But unlike pay-per-mile insurance, the price of a UBI policy isn't directly tied to how many miles you drive.
Usage-based insurance also typically has a smaller maximum discount, especially for people who drive rarely.
Usage-based insurance companies
Because these programs look at many different driving behaviors, it's not always clear how driving fewer miles will impact your rates.
If you're not a perfect driver, consider Nationwide and Grange. These companies will only use your driving data to give you a discount — there isn't a risk that your rates will increase.
Frequently asked questions
What is the best pay-per-mile car insurance company?
Nationwide, Allstate and Mile Auto are all good pay-per-mile insurance companies. Nationwide SmartMiles has the best availability and could save you $540 per year if you drive 5,000 miles per year.
How does pay-per-mile insurance work?
With pay-per-mile insurance, your bill is directly set by how much you drive your car each month. Your policy will have a per-mile rate of a few cents per mile, plus a monthly base price. You’ll pay the base price each month regardless of how much you drive, plus the per-mile rate multiplied by your total mileage. Your mileage is typically tracked by a device that plugs into your car.
How much does pay-per-mile insurance cost?
A typical driver can expect to pay 2 to 10 cents per mile, but the typical per-mile price will depend on your driving history, the car you drive and where you live.
Is pay-per-mile insurance better?
Per-mile insurance may be better if you don't drive your car very often. People who drive less than the national average of 12,000 miles per year are more likely to save with a per-mile plan. But if you commute every day via car — or just don't like worrying about mileage every time you drive — a regular policy might be better.
Methodology
To determine the cost of pay-per-mile insurance, ValuePenguin collected quotes in Portland, Oregon from Mile Auto and Lemonade to find each company's base monthly price and per-mile rate.
Our experts also collected quotes in Portland for three top insurers (State Farm, Progressive and Geico) to compare pay-per-mile rates with rates for standard insurance policies.
All quotes are for a 30-year-old man who owns a 2018 Subaru Outback with the following limits:
- Liability coverage: $100,000/$300,000/$100,000
- Collision deductible: $1,000
- Comprehensive deductible: $1,000
- PIP: $15,000
- Uninsured motorist: $50,000/$100,000/$0
ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only. Your own quotes may be different.
Editorial Note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
