Pay-per-mile car insurance works by tracking your mileage and charging you by the mile. You’ll pay a consistent base rate for coverage, plus a rate for each mile driven. This policy gives drivers more control over their auto insurance costs.
Not all insurance companies offer pay-per-mile options, and details and specifications vary by insurer. Generally, you can buy the same types of coverage for pay-per-mile as you can for conventional policies. Additionally, some companies offer a mileage cap, which limits your billable miles. That can be helpful if you plan to take a long trip occasionally.
Pay-per-mile car insurance is different from a low-mileage discount. With the discount, you earn a percentage off of your premium if you drive less than a certain number of miles per year, while pay-per-mile policies track your mileage and base your cost on how far you drive.
Insurers typically use telematics technology to collect data on your mileage. Telematics collects and transmits data from your vehicle or device over long distances to your insurer. There are a few different ways companies track mileage:
Plug-in device
Some insurers require you to install a device that plugs into your car’s diagnostics port, also called the on-board diagnostics (OBD-II) port. The device seamlessly transmits your mileage data.
Mobile app
While less common, some companies offer a mobile app that uses your phone’s GPS technology to track your miles.
Odometer photos
You may be able to report your mileage to your insurance company by submitting photos of your odometer.
Built-in car technology
Some newer vehicles, known as connected cars, have built-in telematics technology. If your insurer offers this option, you can enable the vehicle to share your driving data with the company.