Pay-per-mile car insurance: Is it worth it for low-mileage drivers?

Supakorn Angaumnuaysiri // Shutterstock

Pay-per-mile car insurance: Is it worth it for low-mileage drivers?

Since the COVID-19 pandemic began in 2020, many people have moved to remote or hybrid work. For many drivers, that means far fewer miles on the odometer, but they’re still paying for insurance plans built for heavy commuting.

Pay-per-mile coverage takes a different approach. Instead of charging a flat rate based on estimated annual mileage, the insurer bills for the miles you actually drive. It’s not a brand-new idea, but interest has grown as daily commutes become less common.

This guide from CheapInsurance.com explores how these plans work, who’s most likely to save, and the trade-offs involved, from budget benefits to the privacy questions that come with tracking your driving.

How pay-per-mile insurance works

Traditional car insurance sets premiums based partly on estimated annual mileage. Pay-per-mile splits the cost in two:

• Base rate. Covers risks like theft, fire, or weather-related damage.
• Per-mile rate. A set amount for every mile driven.

Mileage is confirmed through telematics devices, odometer photos, connected-car systems, or smartphone apps. Many plans include a daily mileage cap, so the occasional road trip doesn’t blow your monthly total. Coverage options — liability, collision, and comprehensive — are the same as with standard policies.

Only a few insurers offer true pay-per-mile coverage nationwide, and availability differs by state. Programs vary in how they track mileage, apply daily caps, and award discounts. Some limit billable miles each day; others average usage over time.

Who benefits most

The biggest gains generally go to:

• Remote or hybrid employees without a regular commute
• City residents who mainly use public transport or cycle
• Retirees who drive less than they used to
• Students or part-time workers with limited driving needs
• Owners of secondary cars that spend most days parked

What the research says

Studies point to both cost and environmental benefits. The Hamilton Project estimates that an 8% drop in driving could yield $50 billion to $60 billion in annual social benefits. Research from UC Berkeley found that competitive per-mile pricing could save individual drivers $58 to $75 a year.

Trial programs saw more than a 30% drop in claims. Groups such as the Clean Air Partnership say reduced driving could cut emissions by 5% to 15%.

Privacy and data concerns

Tracking mileage often requires drivers to share more than just odometer readings. Consumer Reports found some programs track and log location history, driving style, and even phone use while behind the wheel.

Advocacy groups, including the Electronic Privacy Information Center and the Consumer Federation of America, have called on insurers to be clearer about what they collect and how they use it.

Safety benefits from usage-based programs

A 2025 AAA Foundation study of more than 1,400 drivers over 24 weeks found:

• Speeding dropped by up to 13%
• Harsh braking incidents fell 21%
• Rapid acceleration was reduced by 25%

Many drivers maintained these improvements even after the tracking stopped, suggesting the potential for lasting changes in behavior.

Potential downsides

• Monthly costs can vary, which may complicate budgeting.
• Device or data errors can cause billing disputes.
• Availability is limited in some states.
• Privacy trade-offs may not suit every driver.
• High-mileage drivers may still get a better deal with traditional plans.

How to decide

Before making the switch, track your driving for a few months. Ask yourself:

• Do I drive fewer than 7,500 miles a year?
• Am I comfortable sharing location and behavior data?
• Would I rather have a fixed monthly bill or a variable one?

Compare quotes, confirm that coverage levels meet your needs, and read each insurer’s privacy policy before signing up.

Bottom line

Pay-per-mile insurance may reduce costs for motorists who rarely drive. However, the data collection involved means it’s worth choosing a provider that’s upfront about how your information will be used.

Choosing the right plan can mean smaller bills, and possibly safer roads, as long as you understand the trade-offs before you commit.

This story was produced by CheapInsurance.com and reviewed and distributed by Stacker.