How Does Pay-Per-Mile Insurance Work?

Who wants to pay full price for something they don’t use? When it comes to auto insurance, your monthly payment stays the same even when you’re not driving your car. The exception is pay-per-mile car insurance, which adjusts your monthly payment depending on how much you drive, saving you money when you’re not driving as often.

If you don’t drive much, or think you’ll be using your car less in the future, switching to a pay-per-mile auto insurance plan could save you some money. Read on to learn how these plans work and how much you could save.

What Insurance Companies Offer Pay-Per-Mile Insurance?

If you’re considering pay-per-mile insurance, find out which, if any, providers offer it in your state. Insurance companies must seek approval from state departments of insurance before providing these policies.

Though not all companies offer pay-per-mile policies, here are several of the main providers that do and the states where coverage is available:

• Allstate Milewise: Arizona, Delaware, Idaho, Illinois, Indiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia, Washington, Wisconsin, and West Virginia
• Metromile (Lemonade): Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Washington, and Virginia
• Nationwide SmartMiles: Available in numerous states including Alabama, California, Florida, and Texas
• Mile Auto: Arizona, California, Florida, Georgia, Illinois, Ohio, Oregon, Pennsylvania, Tennessee, Texas, and Wisconsin

Can Pay-Per-Mile Insurance Save You Money?

The cost of pay-per-mile car insurance varies with every company and the number of miles you drive every month. And like most car insurance policies, your premium is also based on characteristics like your driving record, the coverages you choose, your age, and gender.

The best way to find out whether a pay-per-mile policy can save you money is by getting a quote for your base rate and per-mile rate, estimating your mileage, and plugging it into a formula.

For instance, let’s say one company charges you a base rate of $29 per month plus 7 cents for every mile you drive, and you typically drive 200 miles a month. You can use this formula to estimate your monthly premium:

Monthly base rate + (Per-mile rate x Estimated monthly mileage)

$29 + ($0.07 x 200) = ($29 + $14) = $43

Then, you’ll compare the pay-per-mile quote to what you’re paying now. If the cost for per-mile insurance costs less than your traditional insurance premium but has the same level of coverage, then you’ll save money with the per-mile insurance.

Is Pay-Per-Mile Insurance a Good Idea?

The main benefit of pay-per-mile car insurance is the potential for saving money. If you drive a lot for work or other regular commutes, you might not come out ahead.

On the other hand, pay-per-mile car insurance can make financial sense if you rarely drive. Low-mileage drivers often include retirees, remote workers, students who live near campus, and people who live near work.

The Bottom Line

Pay-per-mile car insurance may help you save money on your premium if you don’t drive often. To see if it’s right for you, estimate how much you drive each month and find an insurer that offers this type of coverage in your state. Get a quote and compare the pay-per-mile premium to what you’re paying now.

Car insurance rates are based on several factors—and in some states, auto insurers can use a credit-based insurance score to determine what you pay. It’s a good idea to regularly check your credit reports and look for factors that could be impacting your credit scores. You can also take steps to improve your credit score to help you snag a better rate on your car insurance.

If you’re not already keeping an eye on your credit, consider getting free credit monitoring from Experian to see what insurers will consider when evaluating your application.

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