Marissa Hayes is a technical editor and contributing writer. She holds a Bachelor’s Degree in history, and she was the editor of the literary magazine, The Bluestone Review.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Car Insurance Agent Daniel Walker

UPDATED: Jul 19, 2021

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The Short of It

  • Pay-per-mile insurance determines your car insurance rates by how far you drive.
  • This is a great option if you don’t drive very far or often.
  • Drivers generally pay a base rate and then so much per mile driven each month.

Usage-based insurance is a hot topic now, especially considering how many people are working from home. But what is pay-per-mile auto insurance, and how do you know if it’s a good fit for you?

There are two main types of usage-based auto insurance coverage. They are pay-as-you-drive and pay-per-mile. Pay-as-you-drive determines your car insurance rates based on your driving habits, while pay-per-mile insurance is only concerned with how far you drive.

If you are looking for cheaper car insurance, shop around and compare quotes for the best deals.

Enter your ZIP code now to compare quotes for affordable pay-per-mile auto insurance.

What is pay-per-mile auto insurance?

Pay-per-mile car insurance is just like it sounds — you literally pay for each mile you drive, usually around $0.06 a mile.

Although some companies, like Metromile, specialize in this type of auto insurance, many others add special programs to their standard coverage, like SmartMiles from Nationwide and Milewise from Allstate.

Since more standard companies now offer similar programs, you don’t have to look for a special pay-per-mile auto insurance company.

Auto insurance companies use how far you drive as a way to determine your rates. Drivers with longer commutes have a greater risk of being in an accident or getting a traffic ticket. Car insurance rates will usually reflect that.

According to the Federal Highway Administration, drivers in the U.S. average 13,500 miles a year. That seems like a lot, but it averages out to around 37 miles a day. That is easy to rack up if you have a long commute to work each day.

The good news is that you can get cheaper car insurance if you drive less than 25 miles a day.

Take a look at this table that breaks down average annual auto insurance rates based on how far you drive. This will give you an idea of what companies are concerned with your mileage.

Average Annual Auto Insurance Rates by Commute Length
CompaniesAverage Annual Rates for 10 Miles Commute
6,000 Annual Mileage
Average Annual Rates for 25 Miles Commute
12,000 Annual Mileage
State Farm$3,175.98$3,344.01
American Family$3,401.30$3,484.88
Liberty Mutual$5,995.27$6,151.63
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Drivers with a long commute pay about seven dollars more each month. While that doesn’t seem like a lot, it can really add up over time.

Who should use pay-per-mile auto insurance?

Pay-per-mile insurance is great for people who don’t drive very often or very far.

These include:

  • People who work from home
  • Commuters who can take public transportation to work
  • Stay-at-home parents
  • Retirees
  • Drivers with an extra car that isn’t used often
  • College students who don’t leave campus often

If you own a car and don’t drive very far, pay-per-mile car insurance might help you lower your rates.

How does pay-per-mile auto insurance work?

No matter the company you use, the pay-per-mile auto insurance rates are calculated based on two factors.

Most companies use telematics to give you a discount on your standard auto insurance policy. Pay-per-mile insurance is calculated differently.

First, there is a daily base rate that you pay to have the coverage. This is like your basic car insurance rate, and you still get standard coverage.

Companies still use a variety of factors, like age, driving history, and ZIP code, to determine these rates. They are usually cheaper than standard policy rates.

Second, you pay for each mile you drive. These charges are usually calculated monthly. Most companies use a small device in your vehicle that tracks how many miles you drive in conjunction with an app on your phone.

Where is pay-per-mile auto insurance available?

Although many companies offer pay-per-mile or pay-as-you-drive policies, they aren’t available in every state. Check with your insurer to see if a pay-per-mile option is available in your state.

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What are tips for using telematics for your auto insurance?

There are things you need to be aware of if you choose to use telematics to determine your car insurance rates.

Here are a few things to ask your insurer:

  • How are you being tracked? Will you just use an app or will there be a device used as well?
  • What data will the program look at? Will the system just track your mileage, or will it look at your driving habits as well?
  • Is there a mileage cap on the pay-per-mile insurance?
  • Can your rates be increased if you have poor driving habits like speeding?

Make sure you get all of the information about a pay-per-mile program before you sign up. You want to save money but not be blindsided down the road.

Whether you are looking for standard insurance or pay-per-mile auto insurance, shop around to get the best deals.

Enter your ZIP code to compare quotes and find the best pay-per-mile auto insurance rates.