What is pay-as-you-go car insurance?

There are different types of pay-as-you-go car insurance for different needs.

Pay-per-mile is the main type of pay-as-you-go insurance. These terms are often used interchangeably. 

With pay-per-mile, how much you pay will vary based on how many miles you drive. The less you drive, the less you pay. Pay-per-mile car insurance can be a good option for low-mileage drivers. 

Pay-as-you-drive car insurance is sometimes called black box insurance. Your insurer fits your car with a tracking device or ‘black box’ that monitors your driving. It can also be known as a ‘telematics’ policy. Some insurers might use an app on your phone for this.

The black box tracks your mileage and how safely you drive.

Tracking how the vehicle is used, your driving performance is scored through things like speeding, braking, and steering habits. 

The higher your score, the less your insurance will cost next year. 

Pay-as-you-drive insurance is popular for young and inexperienced drivers who can face higher premiums, but it’s available to all. 

For more information, read our guide to car insurance for young drivers.

A tracking device in your car measures how much you drive. Your insurer charges you a fixed ‘base’ rate monthly or annually to cover things like fire, theft and third-party damage. 

You pay another monthly fee based on how many miles you drive. The more you drive, the more you pay. 

Pay-as-you-go car insurance can be a good option for: 

• occasional drivers

• low mileage drivers

• high-risk drivers, such as younger and inexperienced drivers.

If you use your car for short journeys once or twice a week, pay-as-you-go might be more cost-effective than standard car insurance. 

The average annual mileage in England was around 6,600 miles in 2022. If you drive less than this, a pay-as-you-go policy might help you save money. 

Pay-as-you-go can also be a good option for high-risk drivers, who often face steep insurance premiums. 

By choosing a pay-as-you-go option that tracks your driving habits, you can prove you drive safely and responsibly, lowering your premiums. 

Your base rate could be as low as £10 per month. 

However, the overall cost of pay-as-you-go car insurance varies depending on how much you drive and things like your:

• age

• job

• location 

• and driving history 

and your car’s: 

• make

• model 

• and mileage. 

It’s a good idea to compare policies and providers before buying car insurance. One way to do this is by using price comparison websites. 

If you choose pay-as-you-go but end up driving more, it can end up costing more than standard insurance.

For more tips, you can read our guide to get the most out of comparison websites.

Pay-as-you-go car insurance is usually fully comprehensive. This means that you’re protected for:

• damage to your car – this covers repairs or replacement if your vehicle is damaged due to an accident, fire, theft, vandalism, or natural disasters

• third-party liability – which covers medical expenses or repairs if you cause an accident that injures someone else or damages their property

• personal injury protection – this covers medical costs and lost wages if you’re injured in an accident, regardless of fault 

• uninsured/underinsured motorist coverage – this protects you if a driver hits you without insurance or with insufficient coverage

• windscreen cover – which pays for repairs or replacement of your windscreen

• legal expenses cover – this helps with legal costs if you need to pursue a claim.

Whether or not you’re covered for all of the above depends on your policy. You might pay more for add-ons like breakdown cover and cover for driving abroad. 

You should always check your policy details to make sure you have the right level of coverage. 

• savings – low-mileage drivers can save money 

• cost-effective for high-risk drivers – high-risk drivers, like young drivers, might find pay-as-you-go more affordable

• good driving rewards – safe drivers might get discounts. 

• high mileage costs – frequent drivers might pay more

• driving restrictions – young drivers might be impacted by curfews or age restrictions. 

If you want to know how to save on your car costs, read our guide: How to find the right car for your budget. 

It’s important to check what level of coverage you need before purchasing a car insurance policy. To help you decide, read our guide: Car insurance – what does a good policy look like?