Pay For Only What You Use

By Author: Marcus Stalder
Total Articles: 491
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If you are searching around for ways to save on insuring your vehicle, you have probably come across all kinds of different types of coverage and insurance types. With all of these, you pay for your coverage for defined period of time.

Pay-as-you-drive insurance is a bit different. Rather than paying for a period of time (a month, 6-months, a year), you pay only for the miles you actually drive.

About Pay-as-you-drive Insurance

It's been around a while, but only now is it catching on in America.
The idea is simple: you pay for every mile you drive, because that is when you need most of the coverage. This obviously doesn't include comprehensive coverage and any other non-driving situation.

How Miles are Reported

Since you pay by the mile, you and your insurer have to have a way of settling on a number.

Black Box

New technology is partially what is fueling this increase in companies offering pay-as-you-drive plans.
One such innovation allows for GPS-enabled chips to be installed into your car's computer. These automatically report your mileage to the insurance company.
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... (Aside from the insurance itself, you can also save money because your car will be easier to recover if stolen, thus reducing the chance that the insurer will have to pay to replace a vehicle.)

OnStar

This is the other big technological innovation that can help you save on insurance. Since this is for GM vehicles, you should get insurance through GMAC. This way, OnStar will automatically report your mileage to GMAC. You can even call them at any time to see how much you owe at the moment.

Checkups

With this system, you meet with a mechanic, agent, or some other specialist that your insurer selects. They check your mileage each billing period and then the insurer sends you a bill.

Honor System

Admittedly, this is rare.
Smaller insurers will allow you to report your mileage without confirmation. However, should you be found to have not reported the accurate mileage, you will be denied claims and probably dropped as a client.

Is Pay-as-you-drive Car Insurance Right for You?

Unfortunately, this might not even be available to many people because of the limited areas and companies offering pay-as-you-drive insurance.
Currently, State Farm, Progressive, and GMAC are all offering usage-based systems.

People Who Drive Little

If you have a short commute or just don't drive very often, pay-as-you-drive car insurance might be a great option for you. Keep in mind, you can probably get a low mileage discount on conventional coverage.

People Who Drive Often

If you drive twenty miles or more most days, it won't really make economic sense to pay by the mile. You are better off sticking with a conventional policy, especially if you have daily long commutes to work or school.

Mixed-mileage Drivers

If your driving is rather erratic and varied - some days you drive a lot and sometimes you don't drive at all - you should pay attention to your monthly mileage and estimate the cost with car insurance quotes.