Is PAYG Auto Insurance Right For You?

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Have you considered switching to pay-as-you-go insurance? This type of auto insurance coverage can be a good choice for some drivers.

Below we give you all the information you need to know about PAYG car insurance. We discuss everything from premiums to coverage options so you can make the best choice for your driving habits. We also give you our take on some of the biggest insurance companies in the country.

After reading all about PAYG insurance, check out our free rate comparison tool below. He can provide you with quotes from the best auto insurance companies in the country.

What is pay-as-you-go insurance?

Pay-as-you-go coverage is usage-based auto insurance where your rates are determined by your driving habits. The aim of pay-as-you-go insurance is to encourage motorists to drive less. The less time you spend on the road, the less likely you are to be involved in an accident. This reduced risk decreases the chances that the insurance provider will have to pay on your policy.

Typically, insurers will use telematics or mobile apps to track your driving behavior. Telematics are devices that plug into your vehicle and document information about your driving habits.

Insurance companies can use telematics to track:

  • Miles traveled
  • Braking habits
  • Average speed
  • Number of driving hours
  • Time you drive

The purpose of tracking your driving data is to make sure that you are accurately reporting your driving habits. For example, if you claim that you only drive 100 miles per week, the telematics device will be able to verify that.

An insurance company will rely on these devices to protect itself from risky or dishonest drivers.

Who needs pay-as-you-go insurance?

Pay-as-you-go auto insurance isn’t for everyone. Generally, the following drivers benefit the most from pay-as-you-go coverage:

  • Vehicle owners who work from home
  • Shift workers
  • Drivers with short journeys
  • People who do not drive daily
  • Employees with take-out vehicles
  • Safe drivers

The drivers described above have habits that are particularly suited to a pay-as-you-go insurance scheme. These drivers are able to use these niche policies to reduce overall costs while getting the right amount of coverage to protect their vehicles.


The cost of pay-as-you-go auto insurance

The billing practices for pay-as-you-go auto insurance coverage are a little different from a traditional policy. The prices for a pay-as-you-go plan vary depending on the provider and the state you are in. For example, some states have higher accident rates, which increases the average cost of auto insurance.

Most of the time, insurers that offer pay-as-you-go coverage will charge customers a base rate. This rate is generally extremely low compared to a standard six month policy. However, the provider will generally charge a per mile charge in addition to the base fare.


Which companies offer pay-as-you-go insurance?

Many large insurers offer usage-based discounts instead of true PAYG coverage, which we’ll discuss in more detail later in this guide. Several companies have sprung up that specialize in pay-as-you-go coverage. Two of the most important of these are Metromile and Root Auto. When you partner with one of these PAYD (pay-as-you-drive) specialists, you will have access to all traditional coverages like personal injury and uninsured motorists.

Metromile and Root Auto focus on reducing the number of kilometers driven. Each company typically charges low base fares and adds additional fees based on the number of kilometers driven. If you are a low mileage driver, you will get the most benefit from partnering with one of these companies.

Usage-based discounts

Most major insurance companies do not offer pay-as-you-go policies. Instead, companies offer programs that focus on usage-based discounts. These programs are based on telematics which analyzes your driving habits.

The most popular usage-based discount programs include:

  • GEICO DriveEasy
  • Progressive snapshot
  • Esurance DriveSense
  • SmartRide nationwide
  • Allstate Drivewise
  • Safeco RightTrack
  • IntelliDrive travelers
  • State Farm Drive Safe & Save

The specifics of each usage-based program listed above vary from insurer to insurer. It is also important to note that not all of these programs are available in all states. Be sure to ask if these programs are available in your area when shopping for insurance quotes.


Final thoughts: is pay-as-you-go insurance worth it?

As noted above, pay-as-you-go auto insurance is not suitable for all drivers. However, it can be a great option if you currently pay high insurance premiums and don’t drive a lot.

If you have a long commute, a pay-as-you-go insurance policy may not be for you. The best way to know if this will be a benefit is to track your weekly mileage for a few weeks before making a final decision.


Our recommendations for auto insurance

In our industry-wide review, we ranked all of the major auto insurance providers based on the following criteria: cost, coverage, availability, reputation, and customer experience. Find out what our experts have to say about two of the nation’s biggest companies below, then check out our free price comparison tool.

USAA: Ideal for military families

Our team rated USAA as the best for military families. The company is known for providing exemplary customer service. It also offers some of the best pay-as-you-go coverage options in the country. The only downside is that USAA coverage is only available to members of the armed forces and their immediate families.

GEICO: better overall

Our experts gave GEICO an overall rating of 9.5 out of 10.0. GEICO offers usage-based discounts through its DriveEasy program. It’s also worth noting the many plan options available, including carpooling coverage and mechanical breakdown insurance.


FAQ: PAYG insurance

What is kilometer insurance?

Auto kilometer coverage is a specific type of pay-as-you-go insurance where you literally pay per kilometer. The fewer kilometers you drive, the less you pay. These plans are great if you work from home and only drive your vehicle short distances throughout the week.

Does pay-as-you-go insurance require mobile apps or telematics?

In general, yes. Insurers will often ask you to equip your car with telematics or use a mobile app to track mileage and other stats. The reason is that insurance companies want to verify that you are driving as little as you claim.

What is the difference between PAYG insurance and PAYG auto insurance?

With all of the different pay-as-you-go insurance variations, things can get a little confusing. Simply put, pay-as-you-go insurance is a mileage-based program. In contrast, pay-per-drive focuses more on your driving habits, such as whether or not you accelerate.


Methodology

The Detroit Bureau collects data from all of the major auto insurance providers to formulate rankings of the best insurers. Our in-depth rating system takes into account market share, coverage, pricing, customer satisfaction, and industry expert ratings. Each insurer is assigned a weighted score in four categories, as well as an overall score out of 10.0.

We recommend auto insurance companies based on these rankings, but we also encourage you to do your own research and compare quotes to find the best coverage.

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