Do Car Insurance Companies Offer Pay-As-You-Go Options?
 Written by Preston Micalizio Preston MicalizioPreston Micalizio writes insurance content for SmartFinancial. He brings three years of professional experience writing ... Read more |  Edited by Richard MurphyRichard MurphyRichard Murphy manages content on SmartFinancial's website. With a strong background in content strategy and copywriting... Read more |
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Several insurers in multiple states offer pay-as-you-go car insurance, which allows drivers to pay for coverage based on their actual driving habits. While this model can reduce premiums for low-mileage drivers, it may not be cost-effective for those with long commutes or who frequently take road trips.
Keep reading to learn how pay-as-you-go auto insurance works, what it covers and whether it can help you save money on your car insurance premium.
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Key Takeaways
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How Does Pay-As-You-Go Car Insurance Work?
Pay-as-you-go auto insurance, also known as pay-per-mile, is a type of car insurance where rates are based on the number of miles driven. These policies include a base rate determined by traditional underwriting factors — such as your driving record, age and vehicle type — plus a variable rate tied to your mileage.[1] Unlike standard policies that charge a fixed monthly premium, pay-as-you-go premiums can fluctuate.
Data on your mileage is typically gathered through telematics, which uses a small device installed in your car or an app on your cell phone. Telematics typically use GPS tracking to determine how much you’ve been driving and submit that information to your insurer wirelessly.[2]
For example, some insurers, such as Allstate’s Milewise program, utilize a daily rate that charges you based on the number of miles driven that day. Other programs, such as Nationwide’s SmartMiles, update premiums monthly, with your per-mile rate reflecting the amount of driving you did in the previous month. Both programs also feature caps on how many miles per day are accounted for, meaning you won’t necessarily be hit with a huge bill if you decide to take a road trip.[3][4]
What Does Pay-As-You-Go Insurance Cover?
Pay-as-you-go auto insurance typically offers the same coverage options as a standard policy.[1] This includes state-required minimums for property damage and bodily injury liability — and you may have the option to increase your limits for added protection.
You may also be able to get full coverage by adding comprehensive and collision insurance to your policy. Optional coverages or ones only mandatory in some states, such as uninsured/underinsured motorist coverage or personal injury protection (PIP), may also be available. Keep in mind that coverages may vary between policies.
What Isn't Covered?
You likely won’t be covered for normal wear and tear damages to your vehicle, such as routine maintenance, nor any intentional damage you may cause. You’ll also likely not be covered for the commercial use of your car.
Personal property left in your vehicle likely won’t be covered if it’s stolen or damaged — though it may be protected under a homeowners or renters insurance policy. Also, only vehicles listed on your policy are covered. If you drive a new or additional car, it won’t be covered until it’s added to your policy.
How Much Does Pay-As-You-Go Car Insurance Cost?
How much you’ll pay for pay-as-you-go car insurance depends on your base rate and how much you drive. For example, Nationwide may offer a base premium rate of $60 per month based on standard underwriting factors, such as age, gender, type of car and driving history. Additionally, there is a variable per-mile rate.
In this example, if the driver drove 500 miles within the month and had a variable rate of $.07 per mile, their total variable rate payment for the month would be $35, or $ 35 + $ 95 = $130 total for the month. However, if they drove minimally, say only 100 miles, their variable rate would be $7, making their total only $67.
Considering the average cost for a minimum liability auto insurance is around $52 per month, your costs with pay-as-you-go insurance may be more or less than a traditional policy, depending on your mileage and the base rate.[5] For example, some pay-as-you-go insurers, such as Mile Auto, note that low-mileage drivers may save between 30% and 40% when switching from a standard plan.[6]
What Are the Benefits of Pay-As-You-Go Car Insurance?
Pay-as-you-go auto insurance can benefit low-mileage drivers, including students, remote workers and retirees. It allows them to maintain necessary coverage while potentially saving money compared to using a standard auto insurance policy.
Some insurance companies, such as Hugo, allow policyholders to open an account and apply for insurance instantly. They also feature transparent pricing, helping users avoid hidden fees.[7]
Which Carriers Provide Pay-As-You-Go Car Insurance?
Several insurers offer pay-as-you-go plans to help drivers save money. However, keep in mind that not every state offers every pay-per-mile program. Below are a few insurers that offer pay-as-you-go auto insurance:
- Nationwide SmartMiles
- Mile Auto
- Allstate Milewise
- Metromile
- Hugo
How To Get Pay-As-You-Go Car Insurance
You’ll want to shop around with different car insurance companies to get a grasp of potential premiums and whether you qualify for any discounts. Get quotes from three to five insurance companies to get a range of options. Keep in mind you’ll need to provide details about your mileage, alongside details about your location, driving record, claims history and other personal information.
This process can become tedious and time-consuming, as you typically need to obtain quotes from each insurer individually, providing the same information repeatedly. You can speed up this process by using an insurance marketplace like SmartFinancial. After answering a brief questionnaire, we can connect you with a licensed insurance agent to help you find your ideal auto policy. Click here for a free auto insurance quote today!
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Preston Micalizio writes insurance content for SmartFinancial. He brings three years of professional experience writing in various industries, from higher education to e-commerce. He strives to engage with the audience, provide accurate reporting and make complex subjects easily digestible.
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