Pay-as-you-go car insurance |

Pay-as-you-go car insurance

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Save money on car insurance by only paying for the amount that you drive.

It doesn’t make sense that someone who occasionally drives around town pays as much for car insurance as someone who has a two hour commute to work. The pay-as-you-go feature, also known as the milage discount, black box insurance or telematics insurance, is available from a handful of insurers.

If you want the advantages of comprehensive car insurance while on the road, but you don’t drive enough to make it worth paying full price, consider switching to an insurer with options for paying based on how much you drive.


  • Pay by miles driven
  • Low base rates
  • Drive less, pay less


Drive less than 30 miles a day? Save on the coverage you need with pay-per-mile insurance from Metromile. Get a low monthly rate then pay just a few cents per mile. Available in CA, IL, NJ, OR, PA, VA and WA.

  • Rates from $29/month plus pennies per mile
  • Low-mileage drivers could save $611/year
  • All miles over 250 a day are free
  • Easy app and online claims plus 24/7 support

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

With telematics insurance, the cost of your insurance will be based on the amount you drive. If you only do a little bit of driving, your premiums are reduced to reflect this. It works by installing a device, or using a built-in telematics device such as OnStar, that tracks the miles you drive. Both methods act a bit differently.

  • Pay-as-you-go device. This requires the installation of a tracking device on your car that is removed and analyzed by your insurance company. Not only does it track your milage, but it can track your speed, braking patterns and when you drive. This can seem invasive to some drivers.
  • Pay-as-you-go telematics. Milage is reported automatically with OnStar, and collects less data. If you have OnStar, you can qualify for the milage discount if you drive less than 15,000 miles per year.

A black box is a telematics device which records how you drive, including acceleration, deceleration and smoothness. It can also show where and how often you drive, and the amount of time you typically spend on the road. Rather than looking at any one specific journey, the black box looks at the combined effect of many trips to work out what kind of driver you are on the whole.

This wealth of information is a gold mine for car insurance brands as it lets them calculate risk levels much more accurately. It can let safer drivers pay lower premiums to match their personal driving habits. Telematic car insurance is all about getting a personal driving record for insurers to set your premiums by, rather than being lumped into a group price because of your age, gender, location or other factors.

The black box plugs into your car and automatically records data. The insurance company then reviews this data and uses it to adjust your premiums. The information gathered by the black box will be used to assign you a driver safety score, which indicates how safe you are, how competently you drive and what kind of risks you may pose to the insurance company. This driving score will usually replace any no-claims and safe driver bonuses or penalties from the insurer.

Depending on the provider, this may involve giving you a score for every trip, assigning an adjustable overall score or sending information to a phone app or via SMS.

For example, HiRoad Assurance Company now offers an app to Rhode Island drivers that gives drivers a discounted insurance rate based on how safely they drive. Drivers are given a safe driving rating based on their speed, braking and other factors on the road, and they’re given discounts based on that safety rating. The app displays your score and projected discounts for each trip, so you can change your driving behavior based on realtime data.

Compare pay-as-you-go car insurance providers

Name Product Roadside assistance New car protection
Yes, cars under 1 year old & 15,000 miles
Drive less than 30 miles a day? Save on the coverage you need with pay-per-mile insurance from Metromile. Get a low monthly rate then pay just a few cents per mile. Available in CA, IL, NJ, OR, PA, VA and WA.

Compare up to 4 providers

How can pay-as-you-go car insurance save you money?

A good DriveScore, or driver safety score, based on telematic information recorded by the black box, will lower your premiums and while a bad score may increase them.

  • Replaces no-claims discounts. Black box car insurance replaces the no-claims bonuses offered by most insurers. It can take up to six years to get the top level of no claims bonus, but if you are a good driver, black box insurance can help you achieve the equivalent within a single year.
  • Reduces risk category. If you are in a high risk category, such as a new driver or under 25 driver, then the black box can prove that you are not actually a high risk provided you consistently drive well. You will still be charged higher age or experience-related premiums, and additional penalties, but these will be partially offset by a good black box driver score.
  • Claims penalize your premiums less. Because your no claims bonus has been replaced by your driver safety score, you are able to make claims without worrying about a large premium hike. Your premiums will still increase upon making claims, but your driver safety score will remain largely unaffected.
  • Makes you a safer driver. Analysis has shown that compared to standard insurance, young black box drivers are 20% less likely to be involved in a car crash and that their accidents are less severe, costing an average of 30% less. This is thought to be partly because naturally safe drivers are more likely to opt for black box insurance, but also partly because black boxes help people drive more safely. And if you’re driving in a way that will increase your premiums, you’ll be notified so you can change your habits.
  • Provider-independent driver score. If you want to change insurers, some of them may recognise a good DriveScore and offer reduced premiums or higher no claims bonuses.
  • Works for multiple drivers. The black box is for everyone who drives that car. If there are multiple drivers on the policy, and all of them are in high-risk categories then this would typically result in a significant price increase. However, if they are all safe drivers as evidenced by black box data, then you may be able to get significantly lower premiums than you would otherwise.
  • View your own driving stats. You can access the telematic data and take action yourself. For example, you can check what kind of driver someone else on your policy is. If they tend to be unsafe it’s possible that they’re single-handedly hiking up your premiums and you could save money by cutting them from the policy and not letting them drive the car.

The amount of money you can save with a black box device depends entirely on your driving score. A good score can get you a sizable discount while a bad score might raise premiums.

However, regardless of your score, you are still susceptible to the usual penalties such as for being under the age of 25, or having made claims in the past. The black box score does not replace these, it simply provides a new way to save money in order to partially offset them. There might be an additional fee for renting the device itself.

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Who can benefit from the pay-as-you-go option?

Anyone who drives less than the average person can potentially 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 for it may also want to consider this. Some people in particular are more likely to find themselves in these situations.

  • Seniors: After you’ve retired, it’s likely that you will drive much less, and no longer need to pay for full coverage.
  • Students: Pay-as-you-go options are perfect if you’re a student and leave your car at home while you’re away at school or 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. You still need comprehensive insurance in case of theft, vandalism or natural disasters. Pay-as-you-go is a great option.

What else does the black box do?

In addition to tracking how smoothly you drive, the black box also records some other important information. This includes:

  • Location. Your insurer may use the black box data to confirm that your car is kept overnight where you say it is. This helps personalize your premiums further and confirm that the information you have provided is accurate.
  • Distance driven per year. This makes a big difference to the lifespan of a car and the chances of needing to make a claim, but can be difficult to prove. The use of a black box lets your insurer understand how far you drive in a year and whether this is more or less than most other people, and adjust your premiums accordingly.
  • GPS data. The black box also includes a GPS tracker which can be used to help police recover the vehicle if it’s stolen, and provide further information about driving habits.

Black box insurance exclusions

The same exclusions apply to black box car insurance as apply to most typical car insurance policies. The insurer will generally not pay out for:

  • Damage incurred in the course of or resulting from illegal activities
  • Damage that occurred while the driver was under the influence of alcohol or drugs other than those taken as prescribed
  • Damage sustained when the vehicle was driven by someone not listed as a driver on the policy
  • Damage that is in any way related to acts of war, or biological, radioactive or chemical contamination
  • Damage incurred while the vehicle was being used in a race or trial, or on a racetrack
  • Loss resulting from the car being left unattended and unlocked in a public place
  • Loss of value resulting from depreciation or wear and tear
  • Repairs conducted by an unauthorised mechanic, or damage resulting from shoddy repairs unless they were done by someone authorised by the insurer
  • Damage caused by pets or other domestic animals owned by you or which you are legally responsible for

In addition to these, insurers will also typically refuse to pay out if there is evidence of you knowingly being dishonest in your dealings with them. Black boxes make this a lot easier to spot, and insurers will often have clear proof of this if it occurs.

How do I set up pay-as-you-go insurance?

  • Review the terms and confirm that it’s suitable for you
  • Sign up
  • Receive your black box telematic device from the company in the mail
  • Install it under your car’s dashboard by following the instructions provided
  • Drive as normal
  • Regularly review your driver safety scorecard to look for ways to drive more safely and reduce your premiums
  • Once the data has settled or become consistent over time, your driver safety score is locked in, which determines your future premiums, and you can send the box back to the insurer.

Once your driving stops improving or becomes consistent, your premiums will be locked in. As such, step six is very important for reducing future costs.

The black box will draw a small amount of power while the car is running, but enters sleep mode when it is turned off. It will not interfere with any onboard electronics, other systems or the vehicle’s functioning in any way.

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


  • Lets you get car insurance at a lower price
  • Means you only pay for the amount you drive
  • Can be used to quickly achieve the equivalent of a high no-claims discount
  • Will actively result in lower premiums for good drivers
  • GPS functionality assists recovery if your vehicle is stolen
  • Helps you become a safer driver
  • Provides thorough information and evidence in the event of a dispute


  • Only ideal for people who drive less or better than average
  • Requires more policy management than most typical policies
  • It is currently only available with comprehensive car insurance policies
  • You will be required to pay an additional one-time fee in order to rent the black box
  • You will need to actively review your driving behavior to get the best value rather than simply installing and then forgetting about it
  • You may have concerns regarding data collection and privacy issues

Find the cheapest rates

Compare the best car insurance companies near you.

Your information is secure.

Bottom line

Enjoy individual 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 insurer from a black box device, app or built-in telematics, you could save a bundle on your car insurance.

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

Compare pay-as-you-go car insurance providers

Name Product Roadside assistance New car protection
Yes, cars under 1 year old & 15,000 miles
Drive less than 30 miles a day? Save on the coverage you need with pay-per-mile insurance from Metromile. Get a low monthly rate then pay just a few cents per mile. Available in CA, IL, NJ, OR, PA, VA and WA.

Compare up to 4 providers

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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

    • finder 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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