How Does Mileage-Based Auto Insurance Work?

With mileage-based auto insurance, companies can calculate the price for your car insurance based on mileage if you use a tracking device. Learn more about whether these devices are right for you.

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UPDATED: Jun 23, 2022

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Written By: Daniel WalkerReviewed By: (REMOVAL, GONE – 04.11.22) Joel OhmanUPDATED: Jun 23, 2022Fact Checked

What You Should Know

  • You may be able to pay for your auto insurance based on mileage if you use a tracking device
  • Your car will need an OBDII port for the device
  • Some companies also use such devices to monitor aggressive driving behavior

Is it possible to get auto insurance based on mileage driven? If so, how does this work? 

If you own a vehicle but do not drive it a lot, you may worry that you’re paying too much for car insurance. Insurance companies determine auto insurance quotes based on the risk involved. They’ve often had to rely on policyholder estimates when determining a car insurance premium and therefore have had to estimate the risk. 

However, new technology means that they can now price your car insurance based on the miles you actually drive, which means that they handle their risk more effectively, and you may get discounts if you do not use the vehicle much. Here are the options for car insurance that are priced by mileage.

What is mileage-based auto insurance?

Some insurance companies now offer a special device that you can fit into your vehicle if it has the necessary connections. A good example is the Esurance pay-per-mile program. Many older vehicles don’t have the right setup, and you need to make sure that your car or truck has an onboard diagnostics (OBDII) port connected to the management system. 

Once connected, this device will record the number of miles you drive and give you a discount. As you will be on the road less, the associated risk will decrease, and you can even get a driving device car insurance discount and/or get mileage-based car insurance.

Some plans, called pay-per-mile insurance, give a discount for lower miles, while others are set up so that you pay only for the actual miles you drive. Some people can save a lot of money with pay-per-mile insurance.

Do I have an OBDII port for mileage car insurance?

Your onboard diagnostics port is typically found in the cabin, close to the steering wheel or the footwell. Sometimes, you can find it next to the fuse panel. 

If you’re not sure whether your vehicle has this port, you can look at the owner’s manual or search for the answer online. Alternatively, ask your regular mechanic, and they will let you know.

Do mileage-based car insurance devices track driving habits as well?

Some programs meant for mileage-based insurance will also track your driving behavior with this device. For example, they may log your acceleration and deceleration rate, the time of day you drive, and your braking habits. 

In this case, you may get a penalty if you are an aggressive driver or notice increased rates if you drive mostly at night. You should check with your insurance company first to see if they monitor this information.

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How much of a discount can I get with auto insurance based on mileage driven?

The number of miles driven per year by the average American motorist is 13,476, says the Federal Highway Administration. You might expect a discount if you fall well below this figure.

However, the way companies administer this system may vary, and you will want to shop around to find out which program would suit you best. 

Is auto insurance by mileage beneficial?

If you don’t drive very far or very often, insurance based on a tracking device can be an easy way to lower your rates.

Some tracking systems use an app, and won’t know when another driver is behind the wheel, so be careful if you let others drive your vehicle from time to time. If the device tracks driving behavior as well as mileage, their behavior will show up on your record, as the equipment cannot differentiate, and you may lose your discount.

Is the use of driving devices for mileage-based auto insurance voluntary?

At the moment, these car insurance by mileage programs are voluntary — you can decide whether to take advantage or not. It’s not clear whether insurance companies may decide to mandate the use of these driving devices in the future, but that may be impossible if the vehicle in question does not have the appropriate technology.

Privacy concerns are another reason it would be difficult for insurance companies to mandate tracking devices.

Final Thoughts on Mileage-Based Auto Insurance

Many companies now offer mileage-based auto insurance wherein they provide a device that you plug into an OBDII port in your car. This can result in discounts when a policyholder drives less than the average motorist, but some programs also monitor driving behavior.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about insurance. Our goal is to be an objective, third-party resource for everything insurance related. We update our site regularly, and all content is reviewed by insurance experts.

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Written by Daniel Walker
Licensed Insurance Agent Daniel Walker

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by (REMOVAL, GONE – 04.11.22) Joel Ohman
Founder & CFP® (REMOVAL, GONE – 04.11.22) Joel Ohman

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