Pay As You Go Auto Insurance

Company Trusted For Over 25+ Years*

If you do not drive that much and want cheaper car insurance coverage, then check out pay as you go auto insurance. For drivers who rarely drive, you could potentially save over $1,000 a year. 

Pay as you go auto insurance (PAYG), also known as usage-based car insurance, is a type of car insurance where drivers pay for the coverage based on how much they drive. Unlike traditional car insurance policies with fixed monthly or annual premiums, PAYG insurance bases premiums on actual vehicle usage, measured by metrics like miles driven.

PAYG insurance provides flexibility for drivers who do not rack up high miles, like a student of someone who works from home and doesn’t drive much. For motorists who put limited miles on their vehicles annually due to lifestyle factors like working from home, PAYG insurance can yield significant savings compared to conventional coverage. However, for those who log higher mileage for daily commuting or work-related driving, PAYG may end up costing more over time.

In recent years, even top providers like Allstate have entered the pay as you drive auto insurance market. As auto insurance rates have skyrocketed, more people are choosing PAYG insurance as a way to maintain legal coverage, while reducing the cost of insuring their automobile by a lot. 

Pay as you go auto insurance

Top Five Pay As You Go Auto Insurance Companies

1. Metromile

Metromile pioneered the PAYG insurance model. The company captures mileage data directly from a vehicle’s onboard diagnostics (OBD-II) port. Then, it bases insurance rates on a base rate plus a per-mile rate. Customers only pay for the precise mileage they drive without overpaying for coverage they do not use. Premiums adjust up or down each month according to driving activity. 

In addition to highly customized premiums, Metromile offers features like license plate registration, 24/7 claim assistance, and reimbursement for taxi rides during covered claims. However, the insurer only operates in eight states currently.

2. Esurance

Esurance’s DriveSense PAYG insurance functions similarly to Metromile’s model with rates based on actual miles driven retrieved from a vehicle’s OBD-II port device. Policyholders pay a daily base rate plus a per-mile rate for trips taken. As driving frequency changes, premium charges adapt accordingly. 

The insurer provides standard coverage options beyond state minimums along with add-ons like roadside assistance and rental reimbursement. However, Esurance only offers PAYG car insurance currently in 11 states.

3. Allstate

Allstate’s Milewise insurance offers PAYG coverage in 19 states currently. Drivers pay a daily rate plus a per-mile rate based on vehicle telematics. The insurer collects driving data through a mobile app rather than installing a device in the vehicle. Customers document trips manually on the app, making the process less automated than other PAYG options.

Milewise includes features like new car replacement, accident forgiveness, and safe driving bonus checks. It’s important to note that the manual app-based mileage documentation creates potential for human error in reporting trips driven.

4. Root Insurance

Root bases auto insurance premiums on driving habits monitored for two to three test weeks via the Root mobile app. During the test period, customers allow the Root app access to sensors, GPS mileage tracking, and mobile data to measure braking, phone distraction, turning, acceleration, and mileage. After the test drive window, Root provides a customized policy price based partially on mileage, or customers can decline the offered quote.

Root’s PAYG model focuses more heavily on overall driving behavior compared to strict mileage. However, the company only operates currently in about 30 states.

5. Nationwide

Nationwide’s SmartMiles program functions similarly to other PAYG options with a daily base rate and a per-mile usage rate. Customers use either the SmartMiles app or a plugin device to track mileage for accurate readings. SmartMiles also collects driver behavior data to inform discounts for safe habits.

SmartMiles includes standard Nationwide policy features like accident forgiveness and new car replacement. Unfortunately, the program is presently only available in 18 states.

Pros of Pay As You Go Auto Insurance

  • Saves money for low mileage drivers – Motorists who drive minimally during a policy term can save hundreds of dollars over conventional plans with set premiums that do not account for actual usage.
  • Rewards those who reduce driving activity – Cutting back on driving directly leads to lower PAYG premium costs, financially incentivizing reduced road mileage.
  • No long-term commitments – Because coverage charges adjust monthly based on mileage, PAYG customers avoid being locked into six-month or annual policies if driving habits change suddenly.
  • Potential for discounts via good driving – Insurers like Root provide further discounts for smooth braking, low phone distraction driving, and other good behaviors tracked through telematics, allowing additional savings opportunities.

Cons of Pay As You Go Auto Insurance

  • Can ultimately cost more for high mileage drivers – Motorists who drive more than 15,000+ miles annually may pay higher premiums over time compared to traditional auto insurance plans not based on mileage.
  • Privacy concerns over data tracking – Continuous monitoring of driving data may bother customers sensitive about privacy issues surrounding their locations, driving habits, and other information captured.
  • Upfront out-of-pocket costs – Hardware costs for monitoring devices, app fees, and non-refundable down payments where applicable supplement PAYG premium expenses.
  • Limited availability – Most PAYG insurers only operate in a subset of states currently, restricting access for many drivers nationwide interested in this type of coverage.
  • Administrative challenges – Documenting mileage manually on certain programs creates hassles and openings for human error that make PAYG tracking more difficult versus fully automated options.

Sample Pay As You Drive Car Insurance Quotes)

The table below provides pricing samples from top PAYG providers for profiled driver parameters:

Insurer Annual Mileage Base Rate Per-Mile Rate Annual Cost
Metromile 10,000 miles $49/mo $0.099/mile $1,239
Esurance 12,500 miles $44/mo $0.105/mile $1,519
Allstate 15,000 miles $20/day $0.08/mile $1,700
Root 10,000 miles $980 N/A $980
Nationwide 10,000 miles $60/mo $0.11/mile $1,320

*Quotes based on a 35-year-old male living in Kentucky driving a 2012 Toyota Camry

These quotes illustrate estimated annual costs for a driver with a relatively low-to-average yearly mileage range. Actual PAYG premiums can vary significantly based on factors like vehicle make and model, age, location, and driving history. Drivers should compare personalized quotes across multiple PAYG and conventional insurers to find the best rates.

Pay As You Go Auto Insurance With No Deposit

Some insurers offer PAYG policies with no money down, easing barriers to entry for the coverage. Root, for example, has pay as you go auto insurance with no deposit or fees when new customers begin the mobile-app based test drive period. Drivers simply provide credit card information to set up the policy initially without any upfront payment.

Metromile also offers options for starting PAYG insurance without a deposit depending on customers’ financial and credit situations. Qualified applicants can initiate policies and receive monitoring devices without paying anything upfront in some cases. However, securing the coverage still requires a valid credit card on file for charging monthly mileage-based premium costs accrued during the active policy term.

PAYG plans without deposits allow flexibility for customers to try out the coverage. If driving habits change quickly or the product does not meet expectations within a short timeframe, the gaps between payment cycles allow customers to make adjustments or cancel without losing a large prepaid sum of money. However, limitations exist in some cases regarding how long insurers allow coverage to run on their dime before collecting the initial payment.

The Final Word on Pay As You Go Auto Insurance 

In review, pay as you go (PAYG) auto insurance provides a viable alternative to traditional car insurance for drivers looking to base premium costs directly on mileage and usage. PAYG policies utilize telematics technology and driving data to charge rates per mile driven rather than in fixed monthly installments. These customized plans cater specifically to low-mileage motorists who stand to realize significant savings over conventional coverage. 

PAYG auto insurance deserves consideration alongside conventional policies as technology-enabled customized offerings continue maturing. Cost-conscious drivers uncomfortable with overpaying for unused mileage would benefit from exploring PAYG’s flexible pricing models, data transparency, and potential savings relative to ballooning national insurance rates. While still early in development, PAYG insurance positions well to carve out market share given declining per capita miles driven and rising vehicle intelligence capabilities over coming decades.

To compare pay as you drive auto insurance where you live, enter your zip code and fill out an online application. You will be matched with the lowest rates from regional and national providers. Get the cheapest pay as you go auto insurance and save hundreds.