If you are an infrequent driver or are thinking about using alternative forms of transportation to get to work or school, you may be able to reduce auto insurance costs with a pay-as-you-go insurance policy. Pay-as-you-go insurance, also known as pay-as-you-drive insurance and usage-based insurance, is designed for people who are willing to limit their mileage every month and comply with specific guidelines set by their auto insurance provider. Several auto insurance providers now offer this option for drivers who know they won’t be driving their vehicle extensively for a few months and for those who want more coverage options.
How Pay-As-You-Go Insurance Works
Pay-as-you-go insurance may be a great match for drivers who only drive their vehicle on weekends, or live very close to work or school. Buying this type of insurance can help you lower your auto insurance costs because you are only paying for a certain number of miles. If you are confident that you use your vehicle much less than the average person and can prove that you only log in a certain number of miles on your vehicle each year, you may meet the eligibility requirements for a pay-as-you-go insurance plan.
Eligibility Requirements for Pay-As-You-Go Insurance
The specific eligibility requirements for pay-as-you-go insurance vary by insurance provider. Only some car insurance companies currently offer this type of program and you will need to disclose a lot more information than you would with a standard insurance program.
In almost all cases, you will need to prove that you are only driving a certain number of miles per year and explain what you are using your vehicle for. For example, you will have to list how many miles you are driving for work, school or other daily activities. The mileage maximums vary by insurance provider, but typically average around 15,000 miles per year.
Companies that do offer this program typically have some type of odometer reading process in place so that they can track mileage and make sure you’re not going over your maximum in any given month. You may need to complete an odometer audit by a certified business at regular intervals throughout the year, or agree to have some type of monitoring device installed in your car so that the company can track your driving habits.
Some companies that offer this type of program also limit the times of day you can drive the vehicle. For example, you may not be eligible for coverage if you drive during a time that the company defines as “peak time” for accidents. Still, this type of insurance policy can save you money because you are subsidizing insurance costs and only paying for what you actually need.
Sources:
Victoria Transport Policy Institute – Pay-As-You-Drive Vehicle Insurance
DailyFinance.com – Can Pay-As-You-Go Auto Insurance Save You Money?
Insurance.com – Saving cash with pay-as-you-drive car insurance