What Is Pay-Per-Mile Insurance? Costs and Benefits

Pay-per-mile insurance is auto insurance that bases your monthly premium on the number of miles you drive. You pay a fixed base rate plus a per-mile fee, and you get the same coverage options as a traditional auto policy. For drivers with low annual mileage, pay-per-mile car insurance is often the cheaper option.

Pay-per-mile insurance splits your premium into two parts: a fixed monthly base rate and a variable charge for each mile you drive. Your insurer totals your mileage each billing cycle, so your bill rises and falls with how much you actually drive.

Insurers track mileage in one of three main ways:

• A plug-in device that connects to your car’s OBD-II port

• A connected car or smartphone app that reports miles automatically

• Odometer photos you submit each month (Mile Auto uses this method)

Most programs include guardrails for occasional long trips. Nationwide’s SmartMiles program, for example, only counts the first 250 miles you drive in a single day.¹

Pay-per-mile insurance is best for people who drive well below the U.S. average of roughly 11,000 miles per vehicle per year, based on 2023 Federal Highway Administration (FHWA) data.² You’re a good fit if you:

• Work from home or don’t have a daily commute

• Rely mostly on public transportation or ride sharing

• Are retired, a student, or keep a second car you rarely drive

You’re probably better off with a traditional policy if you:

• Commute long distances or drive more than about 11,000 miles per year

• Drive for a rideshare or delivery service

• Aren’t comfortable sharing driving data with an insurer

Pay-per-mile insurance covers the same risks as a standard auto policy. You can buy liability, collision, comprehensive, uninsured/underinsured motorist, and medical payments coverage — the only difference is how your premium is calculated.

Nationwide confirms that SmartMiles offers the same coverage selections as its traditional auto policies.¹

Pay-per-mile insurance rewards low mileage but adds tracking and bill variability. Here’s how the trade-offs stack up.

Pay-per-mile insurance prices your premium on how much you drive, while behavior-based usage-based insurance (UBI) prices it on how you drive. The Insurance Information Institute (Triple-I) classifies both as telematics programs because each uses driving data to set rates.³

Not every major carrier offers a per-mile option. GEICO, for example, does not sell pay-per-mile insurance and instead offers DriveEasy, its behavior-based UBI program.⁴

Telematics programs can also change habits. In a 2022 Insurance Research Council (IRC) survey, 45% of drivers said they made significant safety-related changes to their driving after participating in a telematics program.³

Pay-per-mile insurance typically costs between $20 and $60 per month in base rate, plus a per-mile fee of roughly 3–12 cents. Your exact rates depend on the same factors as any auto policy: your age, location, vehicle, and driving record.

Here’s the math for a driver with a $30 base rate and an 8-cent per-mile rate: driving 500 miles in a month adds $40, for a $70 total bill. Drive 200 miles the next month, and the bill drops to $46.

Based on estimates from Mile Auto, a pay-per-mile specialist, drivers with low annual mileage typically save 30% to 40% compared with standard policies.⁵ Your exact savings depend on your mileage: the further you fall below 10,000 miles per year, the bigger the reduction, while high-mileage drivers may pay more than they would with a traditional policy.

A reliable way to know your number is to compare a pay-per-mile quote against a traditional quote side by side. Luva can help you compare traditional quotes from multiple carriers so you have a benchmark to measure against.

Nationwide SmartMiles, Milewise from Allstate, Mile Auto, and Lemonade are among the most widely recognized pay-per-mile car insurance programs in the U.S.

Availability varies significantly by state. If you'd rather start looking at traditional coverage, Lu can help you compare your options.