What is pay-per-mile car insurance?

If you don’t spend a lot of time behind the wheel, a pay-per-mile policy can be a great way to lower your car insurance costs. Typically, these policies have a fixed base rate as well as a per-mile charge. Premiums vary based on how much you drive and other personal risk factors, but base rates usually range from $30 to $60 with mileage surcharges of 6 to 7 cents or more, depending on the carrier.

If you drive less than 8,000 to 10,000 miles per year, a pay-per-mile policy (PPM) auto insurance policy might make sense. However, these policies aren’t usually right for those who drive more than that. And unlike a standard six- or 12-month policy, not all major carriers offer PPM insurance.

Key highlights

• Pay-per-mile (PPM) auto insurance is designed for drivers who travel less than 8,000 to 10,000 miles annually. 
• The average American drives about 13,500 miles per year, according to the U.S. Department of Transportation.
• PPM premiums are based on a flat base fee plus a per-mile charge, billed on a monthly basis.
• PPM base rates and mileage charges vary by insurer. Expect to pay at least $30 per month, plus 6 to 7 cents per mile.

What is pay-per-mile car insurance?

Pay-per-mile car insurance is similar to regular car insurance when it comes to coverage options. But instead of a fixed rate for a six- or 12-month policy term that you can pay in full or in installments, a PPM premium will vary each month depending on how much (or how little) you drive. 

Mileage is monitored using a telemetry device that plugs into your vehicle or via an app on your phone, and you are charged a per-mile rate (typically 6 to 7 cents) in addition to a flat base rate, which may be assessed on a daily or monthly basis, depending on the carrier.

You may also be subject to non-driving-related charges. As an example, MileAuto charges a $3 convenience fee, a $5 policy administration fee and a $5 mileage data-capture fee per month.

PPM insurance should not be confused with safe-driving programs, also known as usage-based car insurance (UBI). These programs also employ a plug-in device or app to monitor your driving and – if you’re driving safely – apply a discount to your premium when it comes time to renew your policy. Conversely, if your driving habits are less than perfect, your insurer may use that data to justify a rate increase come renewal time.

Pay-per-mile insurance example

Most insurers put a daily cap on how many miles you are charged for so you won’t get a massive bill if you decide to go on a road trip now and again. While the cap varies, 250 miles is common.

What does pay-per-mile car insurance cover?

In most cases, pay-per-mile car insurance offers the same coverages and protections as a standard car insurance policy, the only difference is the fluctuating premium. A PPM policy offers these standard protections:

• Liability will pay out if you are responsible for causing injuries to other drivers or damage to their property.
• Collision coverage pays to repair or replace your vehicle if it is damaged in a crash with another vehicle or by striking a stationary object like a bridge embankment.
• Comprehensive will pay to repair damage to your vehicle that is caused by non-collision events. It covers flood, hail, and fire damage as well as vandalism and even hitting an animal.

Collision and comprehensive are typically packaged with liability and offered as full-coverage car insurance.

What are the pros and cons of pay-per-mile auto insurance?

Here are a few things to consider when deciding whether PPM coverage is right for you:

Who should use a pay-per-mile car insurance policy?

While PPM is not for everyone, it is a great option for drivers who don’t spend a lot of time out on the road.

“Many of my clients who have switched to PPM have seen savings of 30% to 50% on premiums,” says Ryan McEachron with ISU Insurance Services in Victorville, California.

The definition of a low-mileage driver may vary between insurance companies. Some set the benchmark at 8,000 miles per year; others 10,000 miles.Here are a few examples where PPM may be a good option:

• You’re retired
• You work from home
• You rely primarily on public transit
• You’re a student away at college and leave your car at home

What are pay-per-mile car insurance discounts?

PPM car insurance policies typically offer the same discounts that are available for standard insurance coverage. Here are just a few of the most common auto insurance discounts:

• Bundling coverage. Also called bundling, this is a great way to save if you insure your home and vehicle with the same insurance company. Can result in savings up to 25%.
• Getting good grades. A teen driver on your policy can send your premium skyrocketing. If your teen has at least a B average, you should qualify for a discount.
• Installing an anti-theft device. An anti-theft system keeps your car safe and will usually result in a small discount of 5-10%.
• Being a loyal customer. Staying with the same insurance company for years will usually garner a small discount, 5% is common.

How much does pay-per-mile car insurance cost?

Pay-per-mile insurance is not available from all insurers. In addition, even if an insurer offers PPM, it may not be available in all states.

The chart below shows insurers that offer PPM coverage as well as details about their policies taken from company websites. Rates and mileage limits may vary depending on your details and personal risk factors.

Frequently asked questions

What are the alternatives to pay-per-mile car insurance?

If you are looking to lower your premium but drive more than 10,000 miles a year on average, you may want to consider usage-based insurance (UBI) like Allstate’s Drivewise. These programs offer a discount to drivers who avoid speeding, sudden braking, hard cornering and late-night driving. The device or app monitors your driving, and your insurer will discount your premium if they like what they see. Your rate readjusts every six months in most cases.

Is pay-per-mile insurance worth it?

It really depends on how often you drive. If you work from home or rarely drive your vehicle, pay-per-mile insurance may be a cheaper option. But if you drive regularly or rack up a lot of miles annually, then PPM coverage may not be a good option.

How does my insurance company track my mileage?

It varies by insurance company, with some requiring an app on your phone and others using a telematic device that plugs into your vehicle. Regardless of which method they use, your insurer will be tracking your mileage and monitoring for unsafe driving.