Driving less due to high gas prices? Pay-per-mile car insurance could help you save even more

Gas prices have surged more than 30% after the start of the Iran war in late February. In fact, as of April 28, the average cost for a gallon of regular gasoline was $4.18, its highest level in four years, according to AAA.

The price jump is causing many to adjust their habits: More than 50% of Americans plan to travel less due to the high gas prices, according to the CNBC All-America Economic Survey of 1,000 Americans conducted in mid-April.

But driving less isn’t going to lower the price of your standard car insurance policy. Data from the insurance comparison shopping site Insurify found that the average driver would save $27 in insurance costs by the end of the year if they cut their total annual mileage by 10%. However, that amount jumps to $59 if drivers switch to pay-per-mile insurance.

Pay-per-mile car insurance bases your premiums more directly on how much you drive. This kind of coverage charges a daily base rate and then a few cents per mile.

What’s more, these policies are becoming increasingly common. “The popularity of usage-based insurance policies, which includes pay-per-mile, has roughly doubled since 2016, with about one in six policyholders now using such programs,” an Insurify representative told CNBC Select by email.

Here’s how to tell if it’s the right fit for you.

Pay-per-mile car insurance bases your car insurance rates more heavily on how much you drive than standard car insurance does.

With this kind of coverage, you’ll pay a flat rate based on standard car insurance factors, like your credit score, location, and driving record. Then, you’ll pay a per-mile charge, typically between $0.04 and $0.08 per mile.

This can lead to big savings when compared to a standard car insurance policy, according to insurers. Metromile states that its customers save over 40% compared to standard auto insurance. Similarly, Nationwide reports that customers of its SmartMiles® pay-per-mile program save an average of 25% when compared to the brand’s traditional auto policy.

With this kind of coverage, you typically install a transmitter in your car or use an app that tracks your driving. However, some brands like Mile Auto, have customers upload a snapshot of your odometer once a month. While it’s a little bit more maintenance than a typical car insurance policy, the savings could be worth it.

However, it’s not always the right fit — if you’d rather pay the same amount every month, pay-per-mile might not be the best choice since prices change month over month. It can also be less advantageous if you’re planning multiple road trips or are a high-mileage driver.

Pay-per-mile car insurance is typically a good fit for those who don’t drive much. Retirees, city dwellers who utilize public transit often, and remote workers could all benefit from pay-per-mile car insurance.

However, others could also benefit. Typically, those who drive less than 50 miles per day are the best fit for pay-per-mile car insurance, according to Carinsurance.com, which could include people with short commutes.

Not every company that issues standard car insurance also offers pay-per-mile coverage. However, there are quite a few companies to consider when comparing options.

CNBC Select likes Nationwide’s SmartMiles® program for its wide availability in 44 states. This program also has a road trip exception, only charging you for the first 250 miles you drive in a day.

For those who would rather not install a telematics device in their car that may monitor things like speed, acceleration and other factors, Mile Auto simply requires a photo of your odometer once per month to track your mileage.

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every pay-per-mile car insurance review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of car insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best car insurance.

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