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Pay-as-you-go car insurance

Only pay for how much you drive with mileage-based car insurance.

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Why should a driver with a five-minute commute pay the same as a driver with a two-hour commute? If you want great car insurance but don’t drive much, compare pay-as-you-go car insurance.

Our top pick: Progressive

Discover coverage that’s broader than competitors, valuable discounts up to 30% off and perks like shrinking deductibles that reward no claims.

  • Broad coverage, including for custom car parts or ridesharing
  • Transparent pricing tools that help you buy within budget
  • Accident forgiveness on small claims or for staying claim-free
  • Stack a variety of discounts for multiple cars, autopay or homeownership

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

Pay-as-you-go car insurance works by using an installed device, your smartphone or a built-in service like OnStar to track your mileage and driving behavior. Behaviors tracked include your braking, acceleration, cornering or times of day you typically drive. Then, your insurance company sets your premiums based on how safe you drive.

The pay-as-you-go feature is available from nearly all major insurers and a few companies that specialize in this coverage. It’s also known as a low-mileage discount, usage-based insurance, black box insurance or telematics insurance. Many traditional car insurance companies offer telematics through a safe driver program that you sign up for.

How is my driving tracked?

All three tracking methods work in a similar way, such as:

  • Plug-in device. This requires you to install a telematics device in your car called a black box. You may need to remove it every so often, so your insurance company can analyze the behavior tracked by the box.
  • Built-in device. Built-in devices like OnStar or SYNC can show your mileage and driving behavior to your insurance company automatically.
  • Smartphone app. Instead of using a separate telematics device, you download your company’s app to collect driving data on your phone.

How does a telematics device rate my driving?

Rather than looking at one specific journey, the telematics device looks at many trips combined to discover your driving risk. Keep in mind that not every company uses all the tracked data to determine your rate. Some of the factors the black box tracks:

  • Acceleration
  • Deceleration
  • Smoothness
  • Braking
  • Speed
  • Where you drive
  • How often you drive
  • Time spent on the road

Compare pay-as-you-go car insurance

Name Product Roadside assistance New car protection Accident forgiveness Safe driver discount Available states
Progressive
Optional
30%
All 50 states
Discover coverage that’s broader than competitors, valuable discounts up to 30% off and perks like shrinking deductibles that reward no claims.
Metromile
Optional
49%
AZ, CA, IL, NJ, OR, PA, VA, WA
Pay only for the miles you drive, plus enjoy app services you won’t find everywhere like claims and car health updates.
Root
52%
Available in 30 states
Track your driving to receive a low rate that reflects your driving skills, and enjoy a fully app-based policy experience.
Motion Auto
Optional
No
AZ
Reap a myriad of rewards based on how safe you drive and car safety features, plus free accident forgiveness and diminishing deductible.
Geico
Optional
26%
All 50 states
Stack discounts up to 40% off already low premiums, with convenient mobile services like proof of insurance and claims.
Liberty Mutual
Optional
30%
All 50 states
Earn free accident forgiveness after five years claims-free and customize your policy anytime online at the tap of a button.
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Ask an expert: How does telematics help me save on insurance?

Joel Ohman car insurance expert

Joel Ohman

CEO, CFP®, MBA, MDiv

One type of lesser known insurance discount is new to most people: allowing the insurance company to put some type of data recorder in your vehicle to monitor your driving habits. If you have safe driving habits or don’t drive all that often then the insurance company will reward you with lower rates.

Virtually every large carrier offers some form of potential telematics discount: GEICO, Allstate, Progressive, Esurance, Liberty Mutual, State Farm, and many others. Additionally, some specialty insurance carriers who offer “pay-by-the-mile” insurance like Metromile use telematics to calculate miles driven and determine rates.


So should you place a device in your car to record and analyze your driving? Privacy advocates are leery of yet one more device tracking us, but you may just determine that savings of 5% or more is well worth what is essentially a “set it and forget it” car insurance discount opportunity. Now just make sure to drive safely, but you already do that regardless, right?

How much can I save with pay-as-you-go car insurance?

The amount of money you can save with telematics depends on your driving score. A good score can land you a sizable discount, while a bad score might raise premiums. For example, drivers who switch to Metromile save an average of $661 on their annual rates.

However, you may still see higher rates than average because of your age or past claims. The black box score does not replace these factors. It simply puts the focus on your driving and not on the factors you can’t control. You might also see an additional fee for renting the device itself.

How can pay-as-you-go car insurance help me save?

A good driver safety score from telematics information will lower your premiums, while a bad score may increase them. However, many drivers save money using this policy because it:

  • Replaces no-claims discounts. Black box car insurance replaces the no-claims bonuses offered by most companies. It can take up to six years to achieve a high no-claims bonus. But if you’re a good driver, black box insurance can help you achieve the equivalent in one year.
  • Reduces risk category. If you fall into a high-risk category like a new or under-25 driver, the black box can prove you’re not a high risk based on your performance. You may be charged higher premiums based on age, experience or driving record. But a good black box driver score can offset the higher cost.
  • Penalizes less after a claim. Because your safety score replaced your no-claims bonus, you can make claims without worrying about a large premium hike. Your premiums may increase upon making claims, but your driver score can remain steady.
  • Offers provider-independent driver scoring. If you change insurance companies, some recognize a good driver safety score and offer reduced premiums or higher no-claims bonuses.
  • Works for multiple drivers. The black box works for everyone driving that car. If you name multiple high-risk drivers on the policy, this would result in a significant price increase. However, if all drivers on the policy have a safe driving history proven by black box data, you could get significantly lower premiums than you would otherwise.
  • Improves driving safety. Compared to those using standard insurance, young black box drivers are 20% less likely to suffer a car crash. They also face less severe accidents. This increased safety could happen because safe drivers opt for black box insurance or because black boxes help people learn from the black box data. Drivers can take immediate action to improve once they see their driving habits.

Is pay-as-you-go car insurance right for me?

Anyone who drives less than the average person may benefit from the pay-as-you-go system. Similarly, anyone who wants full coverage insurance but doesn’t drive enough to warrant paying full price might consider this option. Drivers who might benefit the most:

  • Seniors. After you’ve retired, you could drive much less than before and may not need full coverage.
  • Students. Pay-as-you-go options work well if you’re a student who leaves your car at home while away at school. It may also work if you stay on campus most of the time.
  • City dwellers. If you live in a metropolitan city like New York or San Francisco, you may own a car but leave it parked much of the time.
  • High risk drivers. Insurance companies charge higher rates for risky drivers, including drivers under 25 and drivers without perfect credit. But usage-based insurance rates depend on your actual driving, not your demographics.
  • Seasonal workers. Seasonal workers like teachers who don’t drive as much during the summer could use pay-as-you-go insurance to save during the off-season.
  • Remote workers. With a 10-foot commute to your home office, you likely don’t drive much except to run occasional errands.

Compare telematics car insurance from top brands

You can choose from a variety of pay-as-you-go or safe driver programs, including:

CompanyProgram namePotential savingsDevice usedHow it works
AllstateDrivewiseUp to 25% cashbackPlug-inRewards you with cashback every six months. Also, get rewards points for completing safety challenges.
EsuranceDriveSenseUp to 8%, $100 for new customersAppLog at least 50 trips per term and receive a discount based on your driving.
Liberty MutualRightTrackUp to 30%Tag attached to rearview mirrorDrive for 90 days to receive your discount.
Metromilen/a$611 on averagePlug-inReceive a base rate and per-mile rate, typically a few pennies per mile. Your bill then reflects the mileage you drove the month before.
NationwideSmartRideUp to 40%App or plug-inDrive as normal for four to six months. Receive a final discount that’s applied at your next renewal.
NationwideSmartMilesUp to 10% for safe driving, more for low mileagePlug-inReceive a base rate and per-mile rate. Pay based on the actual miles you drive.
National GeneralLow-mileage discountNot listedOnStarDiscount applied if you drive less than 15,000 miles per year
ProgressiveSnapshot$145 per year on averageApp or plug-inDrive for one policy period, usually six months. Receive your discount at your next renewal.
SafecoRightTrack5% to 30% guaranteedApp or plug-inInstall for 90 days and then return the device to see your discount.
State FarmDrive Safe & SaveUp to 30%OnStar or appDrive with the app and receive an updated discount at each policy renewal.
TravelersIntelliDriveUp to 20%AppDrive for 90 days to receive a star rating. Your rating determines how much savings you get at your next renewal.

Pros and cons of pay-as-you-go car insurance

Pros

  • Lets you get car insurance at a lower price if you drive less and safely
  • Means you only pay for the miles you drive
  • Quickly achieves the equivalent of a high no-claims discount
  • Result in lower premiums for good drivers
  • GPS assists recovery if your vehicle is stolen
  • Helps you drive more safely and provides feedback
  • Provides thorough information and evidence in the event of a dispute

Cons

  • Ideal for people who drive less or safer than average
  • Requires more policy management than standard policies
  • Only available with comprehensive car insurance policies
  • Requires you to pay an additional fee to rent the black box
  • Because monthly premiums can change, you need to consistently drive safely to get the best value. You can’t set and forget it.
  • You may have concerns about the data collection and privacy issues.

Sign up for pay-as-you-go insurance in 6 steps

  1. Review the terms.
  2. Sign up with the app or policy.
  3. Receive your black box telematics device from the company in the mail.
  4. Install it by following the instructions provided.
  5. Drive as normal.
  6. Review your driver scorecard to improve your driving and reduce your premiums.

Once the data has settled or become consistent, your driver safety score locks in, and you can send the box back to the insurer. As such, step six is very important for reducing future costs.

The black box draws a small amount of power while the car is running but enters sleep mode when turned off. It won’t interfere with onboard electronics or other vehicle systems or functions.

What does the insurance company do with telematics data?

The app or device may automatically transmit data back to the insurance company or may require you to take it out and hand it to your insurer to download the data. The insurance company reviews this data and uses it to adjust your premiums.

Your insurance company then uses the black box information to assign you a driver safety score, which shows the kinds of risks you pose to the company. The insurer may give you a score for every trip or assign an adjustable overall score.

This wealth of information is a gold mine for car insurance brands, as it lets them calculate risk much more accurately. Telematics car insurance lets safer drivers pay lower premiums to match their personal driving habits.

What else does the black box do?

In addition to tracking your driving, the black box also records some other important information, including:

  • Location. Your insurer may confirm that you store your car overnight in a parking garage or locked location. This personalizes your premium further and confirms the information you have provided.
  • Distance driven per year. Mileage makes a difference to your car’s lifespan and the chances of making a claim, but it can be difficult to prove. A black box lets your insurance company understand how far you drive each year and how it compares to other people. It can then adjust your premiums accordingly.
  • GPS data. The black box also includes a GPS, which can help police recover the vehicle if it’s stolen or provide further information about your driving.

Is it safe to trust a telematics device with my data?

Some privacy advocates express concerns over the data collected from telematics devices. How do companies use this personal information? If you share these concerns, you can make sure your insurance company offers full disclosure about what happens to the data collected. You’ll find that most insurance companies use measures to safeguard your personal information, rather than selling it.

Another privacy concern is the GPS tracking feature on the device. For some, this sensitive information offers more private information than drivers are comfortable giving. However, some devices let you turn off the GPS feature.

When deciding if usage-based insurance is the route for you, keep in mind that these tracking programs aren’t mandatory. You can opt in and out at any point.

Black box insurance exclusions

The same exclusions apply to black box car insurance that apply to standard car insurance policies. The insurance company may not pay out for:

  • Damage caused from illegal activities
  • Damage that occurred while the driver was under the influence of alcohol or drugs
  • Damage caused by someone else driving your car who isn’t listed on the policy, in some cases
  • Damage related to acts of war or biological, radioactive or chemical contamination
  • Damage from track or road racing
  • Loss because of an unattended and unlocked car in a public place
  • Loss of value from depreciation or wear and tear
  • Repairs from an unauthorized mechanic or damage from shoddy repairs unless authorized by the insurer
  • Damage caused by pets or other domestic animals under your care or responsibility

In addition, insurance companies may refuse to pay out if you showed dishonesty in your dealings with them. Black boxes make some cases of dishonesty easier to spot with clear proof.

Bottom line

Enjoy car insurance premiums customized for your driving with pay-as-you-go car insurance. If you don’t mind transmitting your driving data to your insurance company from a black box, app or built-in device, you could save a bundle on your car insurance.

If you’re not sure whether pay-as-you-go insurance is worth it, compare other car insurance options to find the best policy for you.

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Frequently asked questions about pay-as-you-go insurance

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2 Responses

  1. Default Gravatar
    IAugust 8, 2017

    I just need a comprehensive insurance for 2 months starting 9/8/17 for driving 3000km coverage only

    • Avatarfinder Customer Care
      JingAugust 8, 2017Staff

      Hi there!

      For short-term low mileage drivers, I’d definitely recommend taking a look at Metromile. They offer comprehensive coverage and you’ll only pay per mile driven.

      Thanks for asking a question on Finder!

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