Potentially save on auto insurance if you don't drive much: How pay-per-mile works

Overview: Pay-per-mile car insurance can offer a smart way to save on auto insurance for those who don’t drive much by aligning costs with actual vehicle usage. With this coverage, drivers pay a lower monthly base rate plus a small per-mile fee, making it especially beneficial for those who may drive less than the national average, such as remote workers, retirees or city dwellers. Unlike traditional insurance, pay-per-mile plans help ensure you only pay for the miles you drive while still helping provide coverage.

Ever feel like you’re paying too much for car insurance when your vehicle barely leaves the driveway? You’re not alone. According to the U.S. Department of Transportation, the average American vehicle is driven about 13,500 miles per year — meaning it spends a significant portion of time parked. However, standard insurance policies typically base rates on average usage, which may not fully reflect lower mileage. Usage-based insurance (UBI) — specifically pay-per-mile auto insurance — is designed for people who don’t drive much and want their insurance rates to better align with how often they actually use their vehicle.

Saving money by driving less: Low mileage car insurance

Pay-per-mile car insurance is calculated the way it sounds — you pay for the number of miles that you drive. Here’s a breakdown of how it works:

1. Base rate — you pay a lower, fixed amount each month. This helps cover your car for things like theft or weather damage (even when it’s sitting still).
2. Per-mile rate — on top of that, you pay a small amount (usually a few cents) for every mile you drive, which is tracked via a smartphone app or small plug-in devices in your car. Because your mileage affects this portion of the cost, driving less can potentially lower your overall insurance expenses.
3. Billing — each month, your premium is calculated by your base rate plus the charges for those miles.

Think of it like your electricity bill: A basic fee plus charges for what you actually use. That’s what can make pay-per-mile car insurance especially appealing to low mileage drivers.

Who might benefit from pay-per-mile insurance?

Not everyone racks up thousands of miles on their vehicle each year. If you’re below the national average, which the U.S. Federal Highway Administration estimates to be just over 11,400 miles per year, you could see real savings with low mileage insurance. Here’s who may benefit:

As a general rule, if you drive under 10,000 miles a year, it’s worth checking out. Just remember, there’s a base rate, so your bill won’t be zero (even if you skip driving some months).

Are there other ways to save through voluntary usage-based insurance programs?

While low mileage insurance may be advantageous for those who don’t drive much, other usage-based insurance programs, such as multiple drivers for a shared vehicle, reward safe habits instead of just low miles. These “pay-how-you-drive” programs, such as the State Farm® Drive Safe & Save® program, determine rates based on things like smooth braking, steady acceleration and staying within speed limits.

So, if you drive more miles but make safe choices behind the wheel, you could still save on car insurance — just in a different way.

Finding what fits your needs

There’s no one-size-fits-all for car insurance. If you don’t drive often, pay-per-mile may work well for you as it potentially offers low mileage auto insurance savings. But if you rack up more miles, a program that rewards safe driving could be a better fit.

The key is matching your coverage to your actual driving habits. To see if a pay-per-mile option or another usage-based program fits your lifestyle, reach out to your local State Farm agent or get a quote online today.