If you drive less than average—maybe you work from home, use public transport, or own a second car—you might be overpaying for car insurance. That’s where pay-per-mile or usage-based insurance (UBI) comes in. This flexible option is gaining popularity in the United States and parts of Europe. But is it worth it?

Let’s break down how it works, who it benefits, and what to watch out for.

What Is Pay-Per-Mile Insurance?

Pay-per-mile insurance charges you based on how much you actually drive. Instead of a flat monthly premium, your total cost includes:

  • A base rate (covers your parked car, theft, etc.)
  • A per-mile rate (based on how far you drive)

Your mileage is tracked either through:

  • A plug-in device
  • A smartphone app
  • Your vehicle’s onboard system (in newer cars)

How It Differs from Traditional Insurance

Feature Traditional Insurance Pay-Per-Mile Insurance
Pricing model Flat monthly/yearly rate Variable based on miles driven
Who it suits best Daily commuters, high-mileage drivers Low-mileage or occasional drivers
Tech requirements None (usually) GPS, tracking device, or app
Privacy considerations Lower Higher—some policies track location and behavior

Is It Available in the US and Europe?

United States:

  • Offered by companies like Metromile, Allstate Milewise, Nationwide SmartMiles, etc.
  • Legal and growing in most states
  • Discounts sometimes available for safe driving habits (hard braking, night driving, etc.)

Europe:

  • Still emerging, but gaining traction
  • UK insurers like By Miles, Aviva, and Admiral LittleBox offer UBI
  • In Italy, France, and Germany, UBI is expanding with incentives for safe and eco-friendly driving

Who Should Consider Pay-Per-Mile Insurance?

It’s ideal for:

  • Remote workers or people who don’t commute daily
  • Retirees or stay-at-home parents
  • Urban dwellers who drive occasionally
  • Owners of second or rarely used vehicles

Not ideal for:

  • Daily long-distance commuters
  • Ride-share or delivery drivers
  • Drivers uncomfortable with GPS/data tracking

How Much Can You Save?

  • Some low-mileage users save 20–50% annually compared to standard plans
  • Example: If you drive less than 7,000 miles/year, pay-per-mile may be significantly cheaper

Pros and Cons

Pros:

  • Fair pricing—you pay for what you use
  • Encourages mindful driving and fewer unnecessary trips
  • Some plans include safe driving discounts

Cons:

  • Privacy concerns—some insurers track location, speed, and driving behavior
  • Not cost-effective if you drive frequently
  • Can be confusing to estimate monthly cost in advance

Final Thoughts

Pay-per-mile car insurance is a smart, modern option for people who drive less than average. It rewards lower mileage and sometimes safe driving habits. But it’s not for everyone—especially if you rack up the miles or are privacy-conscious.

Run the numbers: Track your mileage for a month, get a quote, and compare it with traditional insurance. You might be surprised how much you can save.