Pay As You Go Car Insurance- Is It Right For You?

February 25th, 2009 • Related • Filed Under • by trisha

Car insurance premiums can take a bite out of your household budget. There are many tips available to reduce your car insurance costs but the fact remains you are required by law to carry a minimum amount of coverage if you own and drive a car. While most people are aware that car insurance providers offer discounts for people who travel fewer miles than their high mileage partners many people are not aware that some insurance providers are offering a pay-as-you-go option for lite travelers. Before you cancel your current insurance coverage read the following information to learn more about this new program that is being offered on a limited basis.

Program availability?

Currently there are two insurance companies that are offering the pay-as-you-drive program. Progressive Casualty Insurance Co in Cleveland and GMAC Insurance in Winston-Salem, N.C. Provide this option in multiple states, while others like The Hartford insurance company are considering testing similar programs in other areas.

How does it work?

For drivers interested in utilizing this option you can do so by voluntarily plugging in a high-tech device into your vehicle which tracks and records the amount of miles you travel, transmitting this information to your insurance provider. After tallying this information the insurance company is offering discounts of 25-50 to drivers who use this pay as you go program. Some critics find the act of tracking where and when you are driving an invasion of privacy many low mileage drivers are willing to give up this information for the incentive to save money.

Is this option right for you?

There are several factors that you may want to consider while researching this as a viable alternative to your current insurance coverage.

Low mileage drivers required- Clearly this option is designed for travelers who do not travel many miles on average. Currently there is a tier system in place which allows for different discounts for miles driven annually, with larger discounts for fewer miles.
Good for secondary vehicles- Perhaps you don’t qualify for the low mileage for your main vehicle, however many families have multiple vehicles with secondary cars not seeing the same level of travel as the primary car. You may find a second vehicle qualifies for the pay as you go program while your primary vehicle remains insured with traditional coverage.
The technology may cost you- Before you reconcile your possible savings in insurance premiums consider the fact that you may end up paying additional fees for the technology required to track your mileage. Be sure the amount of money you are saving is not offset by additional expenses incurred by use of tracking devices or On Star programs which are required in some of the programs.
Read your contract carefully- This program is currently not available to all individuals in all areas. For people who have the option of paying as you go, you should understand that similar to other cost saving programs you may get hit with additional fees if you exceed the number of miles covered by the program.