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What is Pay As You Go Car Insurance?

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  • Written By: B. Miller
  • Edited By: Andrew Jones
  • Last Modified Date: 30 October 2016
  • Copyright Protected:
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    Conjecture Corporation
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Pay as you go car insurance is a relatively new type of car insurance in which the premiums are based on the amount that one drives per month. Typically, premium payments are made per month based on this amount; some companies allow customers to estimate the amount of miles or kilometers they will drive per month and base the premium on that, while others will require the installation of a monitoring device in the car to track the distance driven. For people who drive very little, and are fairly safe drivers, pay as you go car insurance can be a good way to save money on car insurance premiums. Finding a company that offers this type of coverage, though, is the hard part.

Normally, car insurance premiums are based on a number of factors including the amount of coverage purchased and how comprehensive it is, the deductible amounts, and sometimes whether the car is primarily used for commuting to work or for pleasure. In general, though, the distance an individual drives per month is not a large factor in determining car insurance premiums. Conversely, pay as you go car insurance offers those purchasing car insurance the option to only purchase what they need, based on how much they drive, and the premiums will be much lower as a result.

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For people who drive very little, pay as you go car insurance can be a good option. It is important to thoroughly research the plan to make sure it is a comprehensive plan, however, since certain features of car insurance may be required by law. There are a few different ways companies will determine the premiums for this insurance. Some companies allow customers to estimate their monthly usage and pay for it up front; if they run out of miles or kilometers, they can call the insurance company and add additional ones for an extra cost. Later, if a claim is made and the distance is greater than the customer reported to the company, he or she could lose his insurance.

The second method involves installing a tracking device in the car that keeps track of the distance driven, and adjusts the monthly premium accordingly. People who go over their allotted distance may find that this type of insurance gets very expensive very quickly. Pay as you go car insurance is still quite rare, but it is likely that it will become more common as people want to save money and drive less in order to help the environment.

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