What is pay-as-you-go car insurance?

Pay-as-you-go car insurance calculates your premiums based on how much and how frequently you drive, instead of how your insurer predicts you’ll drive. The less you drive, the cheaper your premiums are.

Kara McGinley


Kara McGinley

Kara McGinley

Property and Casualty Insurance Expert

Kara McGinley is an insurance editor at Policygenius, specializing in home, auto, and renters insurance. She's been writing about insurance since 2019, and her work and insights have been referenced in Kiplinger and WRAL.com.

Published July 9, 2020|6 min read

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Key Takeaways

  • Pay-as-you-go car insurance, also called usage based car insurance, is a type of car insurance that calculates your premiums based on your driving behavior. The less you drive, the lower your premiums

  • Insurers track your driving through a mobile app or plug-in device that you install into your car

  • Some insurance companies only sell pay-as-you-go insurance, but many major insurance companies offer pay-as-you-go programs or discounts

  • Pay-as-you-go car insurance is a good option for people who do not drive often but still want protection, or for people who might have high premiums because of factors like age or location, but are safe drivers

Car insurance companies use a variety of factors to determine how much your premiums will cost. Premiums are partly determined by how much risk you pose to insurers, which takes into account how safe of a driver you are, your driving history, and more.

Typically, car insurance underwriters use statistics to determine risk based on how you drive, how frequently you drive, and other personal information, like your age and the make and model of your car. Some of the metrics used may not seem relevant to car insurance, but insurers may also take into account your credit score, ZIP code and even your marital status.

If you don’t drive often, and you’re a safe driver, you may want to consider saving money on your car insurance premiums by purchasing pay-as-you-go car insurance from a company that writes policies based on your driving behavior, and not other details about your profile. Some insurance companies may also offer a pay-as-you go program that awards discounts for drivers with a low monthly mileage. Also known as usage-based insurance, pay-as-you-go insurance can be ideal for those who drive their car infrequently, but still want protection without the cost of a standard auto insurance policy.

In this article:

How does pay-as-you-go car insurance work?

Pay-as-you-go car insurance, also called usage based car insurance or pay-per-mile car insurance, is a type of car insurance that calculates your premiums based on the actual usage of your car. The point being, if you’re not driving often, or if you’re always driving safely, you’re less likely to get into a car accident and file a claim. Not every insurance company offers pay-as-you-go car insurance, and most major insurers only offer it as an opt-in discount.

To monitor your driving, auto insurance companies may ask you to report information every policy period, usually through a mobile app or a device that you plug into your car. Your insurance company will use that information to adjust your rates when you go to renew your policy. If you’ve driven less frequently (or more safely) then your insurer may lower your rates and you could potentially save money over a traditional car insurance policy.

How to report your driving

There are a couple of options when it comes to reporting your driving to your insurer. Different insurance companies may offer different types of reporting options.

  • Mobile app: Your insurance company may offer a mobile app for your smartphone that functions as a GPS tracker to record how frequently you drive. The mobile app will track your trips, record at what time of day or night that you drove, and your mileage. The app may even record risky behavior, like if you used your phone while driving or drove late at night. If you drive at less risky times, typically during the daytime, and if you maintain a low mileage, the record can result in a discount. The app may run in the background and only activate when it detects that you’re moving at a certain speed.

  • Plug-in device: Your insurance company may provide you with a plug-in device for your car’s OBD port. Just like the mobile app, the plug-in device will monitor and record your driving. You should be able to see the logs of your driving on your insurer’s website.

Who needs pay-as-you-go car insurance

Whether or not you should get pay-as-you-go or pay-how-you-drive car insurance depends entirely on your own personal circumstances. If you don’t drive often, pay-as-you-go car insurance could be a good option for you.

Standard car insurance policies are expensive for young drivers because teens and young adults are considered high-risk since they have less driving experience. If you are a young driver (meaning under the age of 25) and don’t drive often, pay as-you-go car insurance might be worth looking into.

Car insurance companies may also raise rates for senior drivers, or drivers over the age of 65, because they consider them to be high-risk. If you’re a senior driver, and you don’t drive often or you drive very safely, pay-as-you-go car insurance may be a good option.

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Which car insurance companies offer pay-as-you-go car insurance?

Certain car insurance companies only offer usage-based car insurance policies. These companies do not sell car insurance policies with rates based on other personal details, like standard car insurance companies do. Many of these insurers only sell pay-as-you-go insurance in specific states. Whether or not you should buy a pay-as-you-go insurance policy instead of a standard auto insurance policy entirely depends on your own personal circumstances.

Root car insurance

Root only offers usage based insurance. When you sign up for Root, you complete a “test drive” period using a mobile app and then Root determines your rates based on your driving behavior.

Root doesn’t have any insurance agents, only customer service representatives — and everything is done through the company’s app, including filing a claim. Root continuously tracks your driving through the mobile app for a period of six months. When your policy is up for renewal, your rates will change based on your tracked driving. Root is available in Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, and Virginia.

Read more about Root Insurance


Metromile is another insurance company that only offers pay-as-you-go or pay-how-you-drive insurance policies. Metromile provides drivers with a plug-in device that tracks their driving. The more safely or less frequently you drive, the lower your rates will be. The company only offers insurance in Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington.

Which car insurance companies offer pay-as-you-go discounts?

Many major car insurance companies offer pay-as-you-go programs that may result in discounts off your premiums. Much like Root and Metromile, major insurance companies typically either offer a mobile app or plug-in device to track how you drive.


Progressive’s usage based insurance program is called Snapshot and offers both an app and a plug-in device, as well as a 30-day trial period to make sure that pay-as-you-go insurance is right for you.


Esurance’s pay-as-you-go insurance is called DriveSense. Currently, DriveSense is only offered in 18 states. Esurance offers both a mobile app and a plug-in device to monitor your driving.


Nationwide’s pay-as-you-go insurance program is called SmartRide. SmartRide requires drivers to use a plug-in device that tracks their driving. You only have to run the device for a single policy period to lock in your car insurance discount. You have to already be a Nationwide customer, but using the plug-in device will never raise your rates, only lower them if you’re eligible.


Allstate’s pay-as-you-go insurance program is called Drivewise. Allstate created a mobile Drivewise app to track how often you drive and how safely you drive. Drivers get discounts for keeping speed below 80 mph, limiting late night trips, and limiting hard braking.


Safeco’s pay-as-you-go insurance is called RightTrack. Once you enroll in the program, you immediately receive an initial discount off your policy’s premium. They then send you a plug-in to track your driving habits.


Depending on what state you live in, you might be eligible for Travelers’ IntelliDrive pay-as-you-go insurance program. It’s a 90-day program that uses a mobile app to track your driving habits. If you drive safely, you could potentially receive a 20% discount. You should know your own driving habits before signing up for IntelliDrive, because if you have riskier driving habits this program could actually result in a higher premium.

State Farm

State Farm’s usage-based insurance program is called Drive Safe & Save. This program uses a mobile app to track your driving habits like quick acceleration, speeding, and distracted driving. Safe drivers can earn up to 30% in savings.