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Can Pay-As-You-Drive Insurance Lower My Premiums?

Did you know the less miles you put on your car every month and the less accidents you have on your driving record, the lower your insurance premiums can be? The reason for this is these things indicate to your insurance company you are a low risk driver and thus, not very likely to cause an accident they will have to pay for.

But what if you truly are an exceptionally cautious driver and can provide even more proof of it? And what if, as opposed to your insurance company having to blindly trust the milage estimate you write on your insurance application, you can empirically prove you drive very few miles every month?

This is where pay-as-you-drive insurance comes into play.

Woman's hand holding plant growing out of coins

If insurance companies in your state offer this type of insurance, it may be a very effective way to lower your monthly insurance bills.

However, as you’ll see, pay-as-you-drive isn’t the best solution for everybody and focusing on it too much can make you miss an overall better deal.

How it works

Pay-as-you-drive is different from standard types of insurance in that you are only billed for the amount you drive. To track your driving habits, an insurance company rigs your car with a device that tracks your mileage, as well as other vital statistics that help the insurance company understand how safe of a driver you are.

This concise video from CNET highlights the most important aspects of pay-as-you-drive insurance.

https://youtu.be/HGuMNXCDf-M

 

How much can you save?

The savings on these type of plans are made based on the amount of miles you travel during the lifetime of your policy. Some people have reported savings of up to 50% on their current policy, which is obviously very appealing.

More to consider

Even though pay-as-you-drive can potentially save you a substantial amount of money, it’s important to realize that if you drive a lot, it can also end up making your auto insurance more expensive. Long distance drivers or those that drive a varying amount of miles from month to month may not find great benefit in the pay-as-you-drive system.

Also, some drivers don’t like the idea that they’ll never know exactly how much their next insurance bill will be, as it will depend on their driving habits from the previous month, while there are others that don’t like the idea of being ‘stalked’ by their insurance company.

The little box that is placed in your car will not only track your miles but also your braking habits and the average speed you travel at. Since the technology is not intelligent enough to understand the reason why you might have a higher than normal average speed or the reasons why you are braking, your insurance rates could be at the mercy of a system that doesn’t take into consideration the full picture. For example, you might have had to brake hard because a pedestrian jumped out in front of you, not because you entered a turn too hard.

Finally, keep in mind not all insurance companies offer pay-as-you-drive insurance. Thus, if you limit yourself to only insurers offering this type of plan, you could easily miss an insurer that has lower premiums overall even though they do not happen to offer pay-as-you-drive as an option.

As you can see, there are pros and cons to pay-as-you-drive insurance, but if you consider yourself a cautious driver and don’t drive your car much, it would be worth getting quotes for this type of insurance as you shop around for full coverage auto insurance.

 
video source:
CNET (Mar 27, 2013) – “CNET On Cars – Smarter Driver: Pay as you drive auto insurance”