Pay Per Mile Car Insurance (UK)

Who this page is for

This information may be useful if you drive relatively few miles each year and want to understand whether a mileage-based pricing model could work for your circumstances. It's relevant if you work from home, rely on public transport for commuting, or only use your car for occasional trips rather than daily driving.

Low-mileage drivers, people with a second car that sits unused most of the time, or anyone curious about how miles-driven pricing differs from traditional annual premiums may find this page helpful when comparing options.

How pay per mile insurance differs from standard cover

Traditional car insurance policies charge a fixed premium for a set period, typically a year. Whether you drive 3,000 miles or 15,000 miles during that time, the price stays the same once you've paid (or committed to monthly instalments). Mileage is asked about during the quote process and can affect the initial price, but it doesn't directly adjust your cost month by month.

Pay per mile policies work differently. You typically pay a base premium to cover the administrative and fixed costs of the policy, then a per-mile charge on top based on how much you actually drive. The more miles you cover, the higher your overall cost. Conversely, if you drive very little, your total outlay may be lower than a standard annual policy.

This is distinct from pay as you go car insurance, which is a broader term that can include various usage-based pricing models, not just mileage. Pay per mile specifically focuses on the distance you drive as the main variable affecting cost.

It's also different from black box insurance, which often monitors driving behaviour (speed, braking, time of day) as well as mileage. Pay per mile policies may use similar tracking technology to record miles, but the pricing is based on distance covered rather than how you drive.

What cover may include

Pay per mile insurance typically offers the same levels of cover as standard policies: third party only, third party fire and theft, or comprehensive. The level of protection you choose depends on your needs and what the insurer offers.

Comprehensive cover usually includes damage to your own vehicle, theft, fire, and third-party liability. Many policies also offer optional extras such as breakdown cover, legal expenses, or personal injury protection. What's included and any exclusions will be set out in the policy terms.

The mileage-based pricing applies to the overall cost structure, not the type of cover itself. Whether you're paying per mile or a fixed annual premium, the core protections and policy features work in a similar way.

What affects eligibility and cost

Insurers assess risk in similar ways for pay per mile policies as they do for standard cover. Your vehicle's make, model, age, and security features all matter. Where you live, how the car is used, and who will be driving also influence pricing.

Driver factors such as age, experience, claims history, and any convictions or penalty points are typically considered. The main difference is that your annual mileage becomes a direct cost variable rather than just a risk factor assessed at the start of the policy.

Availability of pay per mile policies varies. Not all insurers offer this pricing model, and those that do may have specific eligibility criteria or restrictions on the types of vehicles or drivers they cover. Payment structures can differ as well; some providers charge a monthly base fee plus per-mile costs, while others use different arrangements.

For drivers who cover very low mileage, this model can sometimes work out cheaper than a standard annual policy. However, if you drive more than initially expected, costs can rise. It's worth comparing both traditional and mileage-based options to see which suits your usage patterns.

Practical considerations specific to pay per mile policies

One of the key things to understand is how mileage tracking typically works. Most pay per mile policies require either a device fitted to your car or a smartphone app that records distance travelled. The technology varies by provider. Some use plug-in devices that connect to your vehicle's diagnostic port, while others rely on GPS tracking via an app. The accuracy and reliability of these systems can differ, so it's worth checking what method the insurer uses and whether there are any privacy considerations you're comfortable with.

Who this pricing model suits comes down to actual usage patterns. If you genuinely drive fewer than around 5,000 to 7,000 miles a year, paying per mile may offer better value than a standard policy priced for average mileage. This can apply to people who work from home, use public transport for commuting, or have a car they only use for weekend trips or occasional errands. However, if your mileage creeps up over the year, the savings can disappear quickly. It's important to have a realistic sense of how much you actually drive before committing to this type of cover.

How estimated versus actual mileage affects cost is another consideration. With traditional policies, you provide an estimated annual mileage at the start, and that helps determine your premium. If you drive significantly more or less than estimated, you're supposed to inform your insurer, but the price doesn't adjust automatically. With pay per mile insurance, your cost reflects the miles you actually cover. This removes the guesswork but also means there's no fixed cap on what you'll pay if you end up driving more than anticipated. Some providers set maximum monthly or annual charges to limit exposure, while others don't, so checking the terms is important.

The role of devices or apps matters for practical reasons. If your policy relies on a smartphone app, you need to ensure the app is running and your phone is charged whenever you drive. Forgetting to activate tracking or having technical issues could cause problems with billing or claims. Similarly, if a plug-in device malfunctions or you switch vehicles, you'll need to coordinate with your insurer to update the tracking setup. Provider discretion on how they handle these scenarios varies, so it's worth understanding the support process before you start a policy.

How this differs from standard monthly or annual pricing models goes beyond just the payment structure. With a fixed annual policy, you know exactly what you'll pay upfront (or across 12 monthly instalments if you choose that option). Budgeting is straightforward. With pay per mile, your monthly bill can fluctuate based on how much you drove that month. This variability can be advantageous if you drive very little in some months, but it requires more active monitoring of costs. If you're someone who prefers predictable expenses, a traditional policy might suit you better even if the overall cost is slightly higher.

Frequently asked questions