Traditional car insurance prices your policy based largely on your profile — your record, vehicle, and location. Usage-based and pay-per-mile insurance take a different approach: they price at least part of your premium on how much and how well you actually drive. For the right driver, these programs can mean real savings. Here is how they work.
What is usage-based insurance?
Usage-based insurance (UBI), also called telematics, uses a mobile app or a small plug-in device to observe your driving. It typically looks at factors like hard braking, rapid acceleration, speed, phone use while driving, and the time of day you drive. Safer patterns can earn a discount at renewal. Common branded programs include Snapshot, Drive Safe & Save, SmartRide, and RightTrack.
What is pay-per-mile insurance?
Pay-per-mile insurance charges a low monthly base rate plus a small amount for each mile you drive. Instead of rewarding how you drive, it rewards how little you drive. It is designed for people who do not put many miles on their car.
Who benefits most
- Low-mileage drivers — remote workers, city dwellers, and anyone with a short or infrequent commute
- Safe drivers who brake gently, avoid speeding, and rarely drive late at night
- Households with a second car that is only driven occasionally
- Drivers confident their habits will score well on a telematics app
The trade-offs to consider
These programs are not for everyone. Telematics means sharing driving data with your insurer, which some drivers are not comfortable with. And with some programs, risky driving habits could result in a smaller discount than expected. If you drive a lot of miles, pay-per-mile pricing may end up costing more than a traditional policy.
How to decide
Start by estimating your annual mileage and being honest about your driving habits. If you drive little or drive carefully, these programs are worth a close look. Many telematics programs also offer an upfront enrollment discount just for signing up, with the ongoing discount based on your results.
On EzRatesAuto you can compare illustrative estimates from 20+ carriers, including many that offer telematics and low-mileage programs. Use it to see the range of options, then confirm program details and final pricing directly with the carrier.