What is pay-per-mile car insurance?
By Allstate
Last updated: March 2024
Key points
- Pay-per-mile insurance bases costs on how much you drive, typically combining a flat daily rate with a charge for each mile you drive.
- This type of policy may be a good fit if you drive significantly less than the average driver.
- Like traditional coverage, you still choose your coverage types and limits, but pay-per-mile pricing gives you more control over costs based on actual use.
Pay-per-mile insurance is a type of car insurance policy that allows you to pay based on how many miles you drive. If you have this type of car insurance, your insurer will likely keep track of your daily mileage to help determine your cost.
How does pay-per mile insurance work?
Vehicle owners who choose pay-per-mile car insurance usually pay a flat, daily rate as well as a per-mile rate. If you opt for this type of usage-based car insurance, the miles you drive are typically tracked by a telematics device that plugs into your vehicle's onboard diagnostic port, which is usually located under the dashboard. The data it collects is reported to your insurance company. You may also be able to view your mileage and other driving information, such as speed and braking trends, via an app or account from your provider.
Some insurers, such as Allstate, require you to preload funds onto your pay-per-mile account. Then, charges are deducted from your account based on how many miles you drive.
As with a traditional car insurance policy, a pay-per-mile policy allows you to select different types of coverage, such as comprehensive and collision, and set the limits and deductibles that are right for you.
How does pay-per mile insurance work?
Here’s how it works:
1. You choose coverage and limits
Just like a traditional car insurance policy, you choose the type of coverage you want, including comprehensive and collision, and set the limits and deductibles that fit your needs.
2. You pay a flat daily base rate
This base rate helps keep your vehicle covered, even on days when you don’t drive.
3. Your miles are tracked
Your insurance company will track how many miles you drive using a telematics device or your phone. A telematics device can easily plug into your vehicle’s onboard diagnostic port (typically located under the dashboard). You can also view your mileage and other driving information, like speed and braking trends, using your insurance provider’s site or mobile app.
4. You pay a per-mile rate
In addition to your daily base rate, you’re charged a per-mile rate based on how much you drive during the billing period.
How much does pay-per-mile insurance cost?
Pay-per-mile insurance can range from about $58 to $150 per month, according to MoneyGeek. Monthly costs usually combine a fixed base rate which is often around $30 to $60 per month, with a per-mile charge averaging about $0.06 to $0.07 per mile. Since your mileage directly affects the per-mile price, your total cost will usually increase the more you drive.
Much like traditional car insurance, how much you pay can depend on factors such as your driving history, the type of vehicle you own, where you live, and the coverage you choose.
Some insurers set a maximum daily mileage charge which means you’ll only pay up to that limit for miles driven in a single day. This can help you avoid unexpected insurance costs if you exceed the maximum miles.