What is pay-per-mile car insurance?

By Allstate

Last updated: January 1

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.

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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.

Is pay-per-mile insurance worth it?

Pay-per-mile car insurance may be especially appealing to people who drive less than the average person. For instance, if you work from home or rely mostly on public transportation, it may make financial sense for you to pay based on the limited miles you drive each day.

Mile-based insurance may also be a good option for drivers who want more control over their car insurance costs, since choosing to drive less may help lower your car insurance bill.

Some insurers set a maximum daily mileage charge. In that case, you'll only pay up to that limit, helping you avoid unexpected insurance costs if you exceed the maximum miles.

How much does pay-per-mile insurance cost?

Your daily rate and per-mile rate add up to the cost of your car insurance. Both rates are typically based on similar factors used to determine a traditional car insurance premium. For instance, the coverages on your policy, type of vehicle you own and your driving history will likely be considered when your insurer determines how much you'll pay for the daily rate and per-mile rate.

Not all insurers offer pay-per-mile car insurance, and it may not be offered in every state.