Pay-As-You-Go Car Insurance: Cost, Coverage And Providers For 2025
Pay-as-you-go car insurance charges you based on how much you use your car each month. Your premium will be composed of 2 parts; your monthly base rate, and the variable amount based on how much you drove that month.
We’ve saved shoppers an average of $600 per year on their car insurance.
Imagine paying for car insurance based on how much you drive rather than a flat monthly rate. If you’re someone who drives fewer miles, you could significantly lower your insurance costs with Pay As You Go (PAYG) insurance. Also known as pay-per-mile, or usage-based insurance, this approach to coverage rewards low-mileage drivers with savings. In order to see these savings, you’ll ned to drive less than 10,000 miles per year, on average. The average American will drive around 14,000 miles per year.
During my 15 years as a licensed insurance agent, I’ve seen how PAYG insurance can benefit drivers who rarely hit the road. This type of coverage offers a tailored solution for those seeking to save money while maintaining essential protection.
Key Takeaways
PAYG insurance saves money for low-mileage, safe drivers.
Mileage tracking ensures personalized premiums based on actual road use.
Ideal for occasional drivers seeking flexibility and cost transparency.
What Is Pay-As-You-Go Car Insurance?
Pay-As-You-Go (PAYG) car insurance, also called pay-per-mile or usage-based insurance, is a type of auto coverage where your premium is based on how much you drive. Instead of a fixed monthly rate, you pay a base fee plus a cost per mile driven. Insurers track mileage through a device installed in your car or a mobile app.
This model benefits drivers with low-mileage by offering lower premiums compared to traditional policies, making it an ideal option for occasional drivers, remote workers, or those who primarily rely on public transportation.
Tip: Drivers with low-mileage can save substantially. For instance, a study by the National Association of Insurance Commissioners found that PAYG policies could reduce premiums by 20% for drivers who log fewer miles.
How Pay-As-You-Go Car Insurance Works
Pay-As-You-Go insurance is designed to match your premium to your driving habits. It typically includes a base monthly rate for essential coverage, such as liability or comprehensive insurance, plus a per-mile cost. For example, you might pay $30 as a base fee and $0.05 for each mile driven.
Mileage is tracked using a small device plugged into your car’s onboard diagnostic port (OBD-II) or through a smartphone app provided by the insurer. Some plans also monitor driving behavior, such as speed or braking habits, to offer additional discounts for safe driving.
Most insurers in this space offer pay-per-mile auto policies, but Hugo Insurance provides legitimate pay-as-you-go policies.
Insurers will provide the same types of coverage as regular auto insurance policies. You can choose to get the state minimum liabiliy coverage car insurance, or you can select a full coverage policy which has comprehensive and collision coverage.
Tip: Keep track of your mileage using a reliable app or notebook. Comparing your own records with insurer data ensures accuracy and maximizes your potential savings.
Pay-per-mile insurance benefits low-mileage drivers, like remote workers or retirees, by significantly lowering costs compared to traditional flat-rate policies. It’s a flexible, data-driven approach tailored to your actual road use.
Some PAYG programs monitor driving behaviors, rewarding safe practices with additional discounts. A study in the Journal of Big Data indicates that usage-based insurance models can effectively promote safer driving habits.
How To Get Pay-As-You-Go Auto Insurance
Getting Pay-As-You-Go auto insurance is a straightforward process. Start by researching auto insurance providers that offer this type of coverage in your area. Not all companies provide PAYG plans, so look for insurers specializing in usage-based policies or pay-per-mile options.
Once you’ve identified potential insurers, request quotes to compare base rates, per-mile costs, and any additional fees. Be prepared to provide details about your vehicle, driving history, and average mileage.
After selecting a policy, you’ll likely need to install a mileage-tracking device in your car or download a mobile app to monitor your driving. These tools may also track safe driving behaviors, potentially earning you extra discounts.
Review the terms carefully to ensure the policy suits your driving habits and coverage needs before finalizing your purchase.
Not all insurers offer PAYG options, and availability may vary by state. Only a few companies provide such programs, and they are not accessible in all regions.
Average Cost Of Pay-As-You-Go Car Insurance
The average cost of PAYG insurance varies depending on the insurer, base rates, per-mile charges, credit history, and individual driving patterns. While specific rates can differ, here’s a general comparison of average annual premiums for traditional full coverage policies from five major providers:
| Insurance Provider | Average Annual Premium |
| State Farm | $1,549 |
| GEICO | $2,521 |
| Progressive | $1,981 |
| Allstate | $2,669 |
| USAA | $1,000 |
Note: USAA offers insurance primarily to military members and their families, often at more competitive rates.
Who Should Consider Getting PAYG Car Insurance?
PAYG car insurance is ideal for people who drive infrequently or for short distances. This includes remote workers who don’t commute daily, retirees who drive occasionally, or city dwellers who primarily rely on public transportation but maintain a vehicle for errands or weekend trips.
Pay-per-mile auto insurance is also a great fit for students who only drive during school breaks or households with multiple vehicles, where some cars are rarely used. If you’re someone who wants more control over insurance costs and drives significantly less than the national average, PAYG can offer substantial savings.
Additionally, eco-conscious individuals may find PAYG appealing since driving less not only lowers costs but reduces their carbon footprint. It’s also an excellent choice for safe drivers, as many PAYG plans reward careful driving habits with further discounts, making it a win-win for those who prioritize affordability and accountability.
Tip: Combine PAYG insurance with other discounts, like bundling home and auto policies, to further reduce premiums and enhance overall savings. Many insurers reward multi-policy customers with significant discounts.
Benefits Of Pay-As-You-Go Car Insurance
There are several benefits to getting PAYG, or pay-per-mile, auto insurance.
Cost Savings For Drivers With Low-Mileage
One of the biggest benefits of PAYG insurance is the potential for cost savings. If you drive fewer miles than the average person, you’re only paying for the coverage you actually use. This makes it an excellent choice for occasional drivers, retirees, or anyone with a minimal commute.
Encourages Safe And Eco-Friendly Driving
PAYG insurance often rewards safe driving behaviors, like avoiding harsh braking or speeding, with additional discounts. Plus, it encourages you to drive less, which reduces fuel consumption and lowers your environmental impact—perfect for eco-conscious drivers. By incentivizing reduced driving, PAYG insurance contributes to lower emissions, aligning with environmental goals.
Transparency And Flexibility
PAYG policies provide clarity on what you’re paying for, with premiums tied directly to your mileage and driving habits. This transparency offers flexibility, as your costs align with your road use, unlike traditional insurance policies with fixed rates regardless of how much you drive.
Drawbacks Of Pay-As-You-Go Auto Insurance
On the other hand, there are several reasons why you might not want to get a PAYG policy.
Higher Costs For High-Mileage Drivers
If you drive frequently or over long distances, PAYG insurance may become more expensive than traditional policies. The per-mile charges can add up quickly, making it less suitable for daily commuters or road-trippers who rack up significant mileage.
Privacy Concerns With Tracking Devices
PAYG insurance requires tracking mileage, often through devices or apps that may also monitor location and driving behavior. Some people may feel uncomfortable sharing this data, raising concerns about privacy and potential misuse of information.
Limited Availability
Not all insurance providers offer PAYG plans, and availability may vary by location. This can make it challenging to find competitive options, especially if you live in a rural area or a state with fewer PAYG providers, limiting your ability to compare rates effectively.
Pay-As-You-Go Versus Usage-Based Insurance
PAYG insurance is a type of UBI, which charges based on mileage driven. It will charge you a variable monthly rate, based on the number of miles you have driven each month. While usage-based insurance considers both mileage and driving behaviors like braking or speeding.
Pay-As-You-Go Versus Traditional Car Insurance
Pay-per-mile insurance is largely similar to a traditional auto insurance policy. However, PAYG aligns costs with actual road use, offering savings for drivers with low-mileage, unlike traditional insurance with fixed premiums regardless of driving habits.
With that being said, traditional policies will sometimes provide discounts for drivers with low-mileage.
How Do Car Insurance Companies Know How Many Miles You Drive?
Insurers track mileage via odometer readings, plug-in devices, or mobile apps, providing accurate data to calculate PAYG premiums. You can calculate your own mileage by looking at your car’s odometer. Take that number and divide it by the age of the car, this will give you an average number of miles driven per year.
PAYG car insurance companies will require an accurate reading before they issue you with a policy, which is why they will use request that you drive with a telematics device in your car.
Best Pay-As-You-Go Car Insurance Companies 2025
Key Statistics
Why We Like Them
⇅State Farm’s Pay-As-You-Go car insurance, offered through its Drive Safe & Save program, is a standout choice for drivers with low-mileage seeking affordable coverage. What I like most about this brand is its reputation for reliability and customer service, backed by years of experience in the insurance industry.
What sets State Farm apart is its combination of competitive rates and personalized savings opportunities. Using a mobile app or a connected device, the program tracks your mileage and driving habits, rewarding safe and low-mileage drivers with discounts of up to 30%.
For those who drive less—like remote workers, retirees, or city residents—State Farm’s PAYG model provides a cost-effective solution tailored to individual needs. It’s a flexible, trusted option that aligns well with modern driving habits, offering both savings and peace of mind.
Benefits & Drawbacks
⇅- Discounts for safe driving
- User-friendly mobile app tracking
- Trusted brand with great service ✓
- Limited availability in states
- Requires constant tracking device
- Not ideal for high mileage ✘
Key Statistics
Why We Like Them
⇅GEICO’s pay-as-you-go car insurance, offered through its DriveEasy program, stands out for its simplicity and focus on affordability. What I like most about GEICO is its consistent emphasis on competitive pricing, making it a solid option for budget-conscious drivers.
The DriveEasy program tracks your driving habits through a mobile app, analyzing factors like mileage, speed, and braking to calculate personalized discounts. For safe, low-mileage drivers—like retirees, occasional drivers, or those who work remotely—this means paying only for what you use, which can result in significant savings.
What sets GEICO apart is its widespread availability and straightforward approach to usage-based insurance. It’s best for people who want an affordable and easy-to-manage policy without sacrificing quality coverage or access to helpful customer service.
Benefits & Drawbacks
⇅- Competitive pricing for low mileage
- Easy-to-use DriveEasy mobile app
- Widespread availability across states ✓
- Limited features beyond tracking
- Privacy concerns with app data
- Savings depend on driving behavior ✘
Key Statistics
Why We Like Them
⇅Progressive’s pay-as-you-go car insurance, offered through its Snapshot program, stands out for its focus on rewarding safe driving and personalized savings. What I appreciate most about Progressive is its transparency and the detailed feedback it provides on driving habits, which helps policyholders understand how they can save more.
Snapshot tracks mileage and behaviors like speed, braking, and time of day to calculate discounts. This makes it ideal for low-mileage drivers, like remote workers or students, who can benefit from tailored premiums.
What sets Progressive apart is its flexibility. You can choose between using a mobile app or a plug-in device for tracking, making it accessible for various preferences. For those seeking affordability and insights into their driving habits, Progressive’s program is a standout option.
Benefits & Drawbacks
⇅- Rewards safe driving habits
- Flexible tracking options available
- Detailed driving behavior feedback ✓
- Potentially higher rates initially
- Discounts depend on driving habits
- Tracking may raise privacy concerns ✘
Key Statistics
Why We Like Them
⇅Allstate’s pay-as-you-go car insurance, offered through its Milewise program, is an excellent choice for drivers who value flexibility and transparency. What I like most about Allstate is its user-friendly approach, allowing drivers to track costs in real time through the Milewise app.
The program calculates your premium based on a daily base rate plus a per-mile charge, making it ideal for low-mileage drivers like retirees, remote workers, or those with a second vehicle they rarely use.
What sets Allstate apart is the level of control it offers. You can easily monitor your mileage and costs, helping you stay within your budget. For drivers looking to save money while enjoying personalized coverage from a trusted brand, Allstate delivers a reliable and convenient solution.
Benefits & Drawbacks
⇅- Real-time cost tracking app
- Transparent pricing structure
- Trusted and well-established brand ✓
- Per-mile rates may vary
- Not ideal for frequent drivers
- Tracking device required for use ✘
Key Statistics
Why We Like Them
⇅USAA’s pay-as-you-go car insurance, offered through its SafePilot program, is an excellent choice for military members and their families. What I like most about USAA is its commitment to serving the unique needs of its members, combining affordability with exceptional customer service.
The SafePilot program tracks driving habits like mileage, braking, and phone usage through a mobile app, rewarding safe drivers with discounts of up to 30%. This makes it especially beneficial for low-mileage drivers or those who prioritize safe driving practices.
What sets USAA apart is its focus on military families, offering competitive rates and tailored solutions. For drivers seeking a reliable and cost-effective option from a company with a strong reputation for trust and service, USAA’s PAYG insurance is a standout choice.
Benefits & Drawbacks
⇅- Exclusive for military families
- Up to 30% safe driving discount
- Exceptional customer service reputation ✓
- Limited to eligible members
- Requires app-based driving tracking
- Not available in all states ✘
Our Methodology
We evaluated car insurance companies based on affordability, features, and customer experience. Our analysis considered pricing transparency, mileage tracking technology, discount opportunities, and availability. Additionally, we factored in company reputation, customer service, and suitability for low-mileage drivers to provide a comprehensive review of Pay-As-You-Go insurance options.
Quotes Assessed
Hours Of Research
Years Of Industry Experience
Brands Reviewed
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