Should You Sign Up for Pay-Per-Mile Auto Insurance in 2025?

Car insurance isn't cheap -- and it's getting more expensive. As of June 2025, the average cost for a full coverage policy in the U.S. is $2,680 per year, according to a Bankrate analysis. That's a hefty price tag, especially if your car mostly just chills in the driveway.

If you're working from home, retired, or just not driving much these days, pay-per-mile auto insurance might fit better. You pay a small base rate, then a few cents for each mile you drive.

Here's when pay-per-mile insurance makes sense, and how to shop around for the best rates.

How pay-per-mile auto insurance works

Pay-per-mile policies still give you the same protection options as regular car insurance (liability, collision, comprehensive, etc.). The only difference is how the billing is calculated.

You pay a small monthly base rate, then a few cents for every mile you drive. The fewer miles you rack up, the less you pay.

Here's a quick example:

• Base monthly rate: $30
• Per-mile rate: $0.06
• Monthly mileage: 500 miles

Total cost that month: $30 + (500 × $0.06) = $60

The base rate is largely decided by your driving history, location, car type, and more, but it's way cheaper than a regular policy.

As for mileage, this is usually tracked by a plug-in device connected to your vehicle. Some insurers also offer built-in tracking if your car already has the tech. It's automatic, secure, and more accurate than guessing your mileage on a form.

As with any insurance policy, shopping around is super important. Two insurance companies offering the exact same coverage could have two completely different prices.

You might be able to save hundreds of dollars per year just by switching car insurance -- and it only takes a few minutes to find out. Check out this free tool to compare rates from the top insurance companies.

Who pay-per-mile insurance is best for

If you drive fewer than 10,000 miles per year, you should at least run the numbers.

Here are a few groups that might benefit most:

• Remote workers: If your daily commute is from the bed to the couch, you're probably not driving much.
• Stay-at-home parents: Quick trips to the store or school don't add up much over a year -- and you shouldn't have to pay the same rates as a full-time commuter.
• Retirees: If you live in a walkable area and mostly drive to the grocery store or doctor, this could be a huge win.
• Multi-car households: Got a second car that rarely leaves the driveway? A pay-per-mile policy might make sense for that one car.

Note: Some insurers cap your daily charges. So if you take a weekend road trip or vacation drive, you won't be penalized for going over.

When traditional insurance is still a better fit

If you drive a decent amount (say, over 12,000 miles per year), then a traditional auto insurance policy might be cheaper. Same goes if you drive in areas with higher accident rates or live in a state where per-mile policies are limited or unavailable.

Also note: While the tracking tech is usually hassle-free, it's not for everyone. The device that tracks your mileage might also send your location, speed, and other data points to your insurance company.

So if you're not cool with a device or app monitoring your mileage, it's probably best to stick with a traditional policy.

Is pay-per-mile insurance worth it in 2025?

If you're not clocking a lot of miles behind the wheel, there's a good chance you're overpaying for car insurance. Pay-per-mile policies offer a smart alternative, especially in today's flexible work world.

They won't be the right fit for every driver -- but for the right person, it's a low-effort way to put money back in your pocket.

And in this economy? Every little bit helps.

Explore the best car insurance companies in 2025. You could save hundreds by switching – and retain the exact same coverage types you already have.