Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Mar 23, 2022

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Key Takeaways

  • Pay as you go car insurance lets you pay only for the miles you drive
  • There are not many pay as you go insurance companies yet, but the list is growing
  • If you drive less than 10,000 miles annually, you might be able to save money on your car insurance rates

Everyone wants to find the best deal when searching for car insurance. Depending on your situation, you can find great discount programs from different car insurance companies. Some excellent ways to save money on your car insurance include safe driver discounts, special promotions, and pay as you go car insurance.

If you drive less than the national average of 10,000 miles per year, you may qualify for a pay as you go insurance policy. Pay as you go auto insurance allows you to pay only for the miles you drive, which can save you a significant amount of money in the right circumstances. If you are wondering if pay as you go car insurance is a good deal for you, then this article should help answer your questions. To compare quotes from top car insurance companies, enter your ZIP code to find the best rates.

What is pay as you go car insurance?

Pay as you go insurance is a type of car insurance policy growing in popularity in the United States. Currently, pay as you go insurance is only available in select states by a handful of different pay as you go insurance companies. As more Americans switch to work-from-home positions, the list of pay as you go insurance companies is growing.

When you set up a pay as you go car insurance policy, you often must estimate how many miles you will drive in the covered year. The pay as you go insurance company evaluates your insurance risk just like a standard policy. Factors such as age, gender, type of car, and sometimes credit score determine the base rate of a pay as you go car insurance policy.

As more Americans switch to work-from-home positions, the list of pay as you go insurance companies is growing.

The base rate is a flat monthly fee configured using the factors above. This monthly fee is relatively low, averaging around $30 per month. On top of the flat fee, the pay as you go insurance company charges you for each mile you drive. The per-mile rate for top pay as you go insurance companies is usually only a few cents.

Popular pay as you go insurance companies charge per-mile fees in various ways. Some companies deduct payments from your account on the day you drive. Others may charge per-mile fees at the end of the month. The latter setup typically has you pay the base rate at the beginning of the month, then the miles you drive are rolled into the following month’s bill.

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How does pay as you go car insurance work?

There are a few different ways that pay as you go insurance companies determine your monthly mileage. Sometimes pay as you go auto insurance relies on telematics devices. Telematics devices are digital instruments that plug into your vehicle’s onboard diagnostics (OBD) port. Telematics devices measure driving behavior as well as mileage for some policies.

Telematics devices are more popularly known for their use in safe driver discount policies. Safe driving promotions use telematics devices to measure driving behavior like speed, acceleration, and abrupt stops.

In pay as you go insurance, your driving behavior is rarely monitored by telematics devices. Usually, these instruments only use tools like GPS or diagnostics to measure mileage driven.

Not all pay as you go insurance companies require telematics devices. Newer cars come standard with built-in Bluetooth integration. Bluetooth allows the vehicle to connect to a smartphone app that relays mileage information directly to the car insurance company. Some companies only require you to send them a picture of your car’s odometer every month.

Is pay as you go car insurance a good deal?

Pay as you go auto insurance can save some drivers a significant amount of money on their rates. Anyone who drives less than the national average of 10,000 miles per year might benefit from a pay as you go insurance policy. However, even if you drive fewer than 10,000 miles annually, there are important questions to consider before choosing a pay as you go insurance policy.

Most pay as you go insurance companies allow for a daily mileage cap. A daily mileage cap means that you will no longer be charged the per-mile rate after a certain number of miles driven in one day. For Nationwide SmartMile, this is 250 miles per day or 150 miles for New Jersey residents. Having a mileage cap is helpful if you occasionally take longer road trips.

Before deciding to enroll in a pay as you go insurance policy, you should ask yourself if 10,000 miles per year is well above what you typically drive.

If road trips are an integral part of your life, then pay as you go car insurance might not be a good fit. Despite having daily mileage caps, frequent long trips could be ill-fitting for a pay as you go insurance policy. In some situations, you could be penalized or even dropped from coverage if you consistently exceed your projected annual mileage.

Before deciding to enroll in a pay as you go insurance policy, you should ask yourself if 10,000 miles per year is well above what you typically drive. If you find yourself saying, “Well, I guess I could drive a little bit less,” then a traditional car insurance policy might be a better idea.

Who can save money with pay as you go insurance?

Pay as you go car insurance is only suitable for people who drive infrequently or very short distances. Historically, work commutes have made pay as you go insurance policies viable only for a niche demographic.

As part of the ongoing impacts of the COVID-19 pandemic, more Americans than ever before are working from home. Work-from-home employees typically don’t have a commute more extensive than walking to another room. If you work from home and don’t find yourself driving very often on your off days, then pay as you go car insurance might not be a bad idea.

Other individuals who typically don’t drive as much may include:

  • Retirees who spend most of their time at home
  • Younger drivers who only commute to school
  • People who live in densely populated cities and frequently use public transportation

Additionally, individuals who own backup or leisure cars that they drive infrequently might benefit from a pay as you go auto insurance policy. There are other types of car insurance for garaged vehicles, so it is best to explore car insurance quotes thoroughly before deciding on a policy.

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Pay As You Go Insurance Companies

Pay as you go car insurance policies are rising in popularity as Americans drive fewer miles. Despite the rise in interest, very few pay as you go insurance companies exist. Furthermore, the companies that provide pay as you go insurance may only offer them in a few select states.

Pay as you go car insurance companies include:

  • Mile Auto: Available in four states
  • Metromile: Available in eight states
  • Allstate Milewise: Available in 21 states and the District of Columbia
  • Nationwide SmartMile: Available in 39 states and the District of Columbia

Allstate Milewise and Nationwide SmartMile have the most extensive pay as you go insurance coverage in the United States. Average base rates and per-mile fees for pay as you go insurance companies are pretty competitive. If you are interested in a pay as you go auto insurance policy, there is likely an option to fit your needs.

Is pay as you go car insurance a good deal for you?

Finding the right car insurance to fit your lifestyle can be challenging. Many car insurance companies offer varying levels of coverage and discounts that you can apply to your policy. After reading this article, you should better understand whether pay as you go car insurance can save you money. To find the best coverage for you, enter your ZIP code to compare quotes from top pay as you go insurance companies.