The Complete Guide to Pay-as-You-Go Car Insurance

Pay-as-you-go car insurance is a type of coverage that bases your rate on how much you drive. This flexible auto insurance coverage typically comes in two forms: a true pay-as-you-go policy — which only a few companies offer — and pay-per-mile.

While Hugo is one of the few insurance companies that offer true pay-as-you-go car insurance, many insurers, including Nationwide, Allstate, and Metromile, offer pay-per-mile policies that are decent alternatives for low-mileage drivers who want to save on car insurance.

If you’re curious about pay-as-you-go and pay-per-mile car insurance, here’s everything you need to know about how they work, the best pay-as-you-go companies, and who these types of car insurance make sense for.

Key Takeaways:

• With pay-as-you-go insurers like Hugo, you pay a daily rate and can turn coverage off and on, as needed.
• With pay-per-mile plans, you pay a per-mile rate on top of a standard monthly base rate.
• Insurance companies use odometer readings, telematics devices, and smartphone apps to track your mileage.

How Pay-as-You-Go Car Insurance Works

With pay-as-you-go car insurance, the less you drive, the more you save. Hugo is one of the few companies that offer a true pay-as-you-go product. This cutting-edge insurer lets you purchase insurance for three, seven, 14, or 30 days, as well as six months, and you can add days when you need them. With these types of policies, you have coverage only when you’ve paid for it and your policy is active.

Pay-per-mile insurance products, such as Metromile, Mile Auto, Allstate Milewise, and Nationwide SmartMiles, function a little differently than pay-as-you-go insurance. With these plans, you pay a base rate for insurance plus an additional fee for every mile you drive. That means your insurance costs will likely change monthly depending on how much you drive.

In general, these types of plans can save you money if you work from home, have a short commute, or otherwise don’t drive often.

How pay-as-you-go insurers calculate your rate

With pay-as-you-go insurance companies like Hugo, you pay a daily rate and can toggle coverage on and off whenever you need it. As with traditional car insurance, your rate depends on factors like your age, gender, driving record, marital status, and ZIP code.

With pay-per-mile plans, you pay a base rate that insurers calculate using these same factors, plus a per-mile rate. Your base rate stays the same, while your mileage cost will depend on how much you drive.

How pay-as-you-go insurers track your miles

Insurance companies use a variety of methods to track your mileage, including:

• Odometer readings: Some insurers, like Mile Auto, don’t use a tracking device to record your mileage. Instead, you submit monthly photos of your odometer. This is a good option if you don’t feel comfortable having a tracking device in your vehicle.
• Telematics: Other companies use telematics devices that you install in your car to track your miles.
• Mobile apps: Insurance companies can also monitor your driving distance using smartphone apps. You simply download the app on your phone, and it tracks your mileage automatically.

The Best Pay-as-You-Go Car Insurance Programs in 2024

The best pay-as-you-go auto insurance programs help low-mileage drivers save on car insurance premiums while offering solid coverage options. Here are some of the top companies for pay-as-you-go and pay-per-mile insurance. We chose the following options based on average rates, policy customization options, online customer testimonials, and more.

Nationwide SmartMiles

• Compare.com Rating: 4.20 out of 5

Nationwide SmartMiles helps low-mileage drivers save money. You pay a base rate plus a per-mile rate each month. You can participate in the SmartMiles program in two ways: by inserting a small device in your car to track your miles or through an eligible connected car. SmartMiles is currently available in all states except Alaska, Hawaii, Louisiana, North Carolina, New York, and Oklahoma.

Allstate Milewise

• Compare.com Rating: 4.15 out of 5

Allstate Milewise is another pay-per-mile car insurance program that uses a device to capture your monthly mileage. Like SmartMiles, you pay a daily base rate plus a per-mile rate when you drive, and you receive the same coverage as traditional car insurance. The device collects information such as how fast you drive, miles, time of day, driving events, and location.

Milewise is currently available in six states.

Metromile

• Compare.com Rating: 3.6 out of 5

Metromile specializes in pay-per-mile car insurance and bases your rate on your driving habits. You can choose from liability, comprehensive, and collision insurance. Metromile also offers roadside assistance, glass repair, and 24/7 claims support.

With Metromile, you pay a monthly base rate — which starts at $29 per month, according to its website — plus a few additional cents for each mile that you drive.

Metromile is currently available in eight states.

Hugo

• Compare.com Rating: 3.22 out of 5

Hugo is one of the few car insurance companies that offer true pay-as-you-go car insurance. With Hugo, you can choose a liability-only policy that gives you the flexibility to only pay for coverage when you need it. There’s no down payment or up-front fees, and you can purchase insurance in three, seven, 14, or 30 days or six-month increments and make changes using the company’s website. Unlike other insurance companies, Hugo doesn’t monitor your driving.

As of writing, Hugo is available in 13 states.

Mile Auto

• Compare.com Rating: 2.98 out of 5

Mile Auto offers pay-per-mile auto insurance for people who drive 10,000 miles or less per year. The company doesn’t use a tracking device — instead, it calculates miles by having you take a picture of your odometer at the end of the month and send it in.

You can choose from liability, comprehensive, and collision coverage with Mile Auto, and the company also offers optional coverages, like rental vehicle reimbursement and roadside assistance.

Mile Auto is currently available in seven states.

Pros and Cons of Pay-as-You-Go Insurance

If you don’t drive much, pay-as-you-go insurance might seem like an ideal option. But, before deciding if it’s right for you, consider the following pros and cons.

Pros

• Potential to save money on insurance: If you rarely drive, pay-as-you-go insurance can help you save money on car insurance.
• Good for the environment: Driving less is better for your wallet and for the environment.
• Mileage caps: Many insurers cap the number of miles you pay each day. The cap is 250 miles in most states, but in Oregon, Illinois, Indiana, and Ohio, it’s 150 miles.

Cons

• Not available through all insurers: Not all insurance companies offer pay-as-you-go or pay-per-mile programs. You might have to switch insurers if you want to participate.
• Not available in all states: Many pay-as-you-go and pay-per-mile programs aren’t available in all states. For example, Hugo is currently available in only 13 states.
• May cost more than standard insurance: If you underestimate how much you drive or your circumstances change and you put in extra miles, you could end up paying more than you would with a standard insurance policy.

When Pay-as-You-Go Insurance Makes Sense

Pay-as-you-go coverage might make more sense than a traditional car insurance policy for the following groups:

• Retirees: You no longer have to commute to work, and you don’t drive very often.
• Stay-at-home parents: You’re at home most of the day with your children and use your car only to run the odd errand or go to appointments close to home.
• People who work from home: You don’t have to deal with a daily commute and only drive the occasional evening or weekend.
• Employees with short commutes: While you still have to go into the office, you usually walk or take public transit and only drive if the weather is bad.
• College students: You only drive your car a few times per year when you go home to visit family and friends.
• Drivers with multiple cars: You have an extra vehicle you only drive in the summer or sporadically throughout the year.

Pay-as-You-Go Car Insurance FAQs

Pay-as-you-go and pay-per-mile coverage function differently than traditional car insurance, so you might have a lot of questions. To provide more information, here are answers to some of the most commonly asked questions.

How do long trips affect your pay-per-mile premium?

Many insurance companies cap the number of miles you pay for each day. In most states, the cap is 250 miles, and in Oregon, Illinois, Indiana, and Ohio, it’s 150 miles. If you go on road trips, once you hit the cap, you won’t have to pay for any additional miles.

What’s the pay-as-you-go method of insurance?

The pay-as-you-go method allows you to purchase smaller amounts of insurance based on how much or how far you drive. This can help people who don’t drive often or can’t afford to pay high up-front insurance fees to afford coverage.

How do you insure a car you rarely drive?

You can use pay-as-you-go or pay-per-mile insurers instead of a traditional car insurance policy to affordably insure a vehicle that you rarely drive.

Why do insurance companies ask how many miles you drive?

If you’re using a pay-per-mile plan, your insurer will ask you to install a device in your car or to report the number of miles you drive so it knows how much to charge each month. Pay-per-mile plans typically charge a fixed base rate plus a variable mile rate, which can change each month.

Data Methodology:

Data scientists at Compare.com analyzed more than 50 million real-time auto insurance quotes from more than 75 partner insurers in order to compile the rates and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information.

All the rates listed in this article have been collected from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide readers with insights into how auto insurance companies determine their premiums.

Sources:

1. J.D. Power, “2023 U.S. Auto Insurance Study,” accessed January 1, 2024.
2. Insurance Information Institute, “Background on: Pay-as-you-drive auto insurance (telematics),” accessed August 27, 2024.