You may consider yourself a savvy auto insurance shopper who carefully weighs the pros and cons of various deductibles, makes sure to get every possible discount and carefully tailors your policy to your needs. But did you know you may be able to buy a pay as you go or low mileage auto insurance policy that could result in sharply lower premiums if you don’t put many miles on your car each year?
Premiums on pay as you go auto insurance policies are based in part on the number of miles driven. Policy specifics vary, but premiums may be based on a specified range of miles driven, actual miles driven, or other variations (sometimes including when you drive and driving style).
Mileage may be determined by periodic certified odometer readings, by uploading data from the auto’s on-board computer system, or from GPS-based technology. In order to accurately monitor mileage, some insurance companies require that a device to track mileage and other driving data be installed on the car.
Pay as you go auto insurance is not the right choice for everyone. Here are the pros and cons of pay as you go auto insurance.
Pros of pay as you go auto insurance include the following:
1. For some drivers, it can be much less expensive than traditional auto insurance. It is impossible to calculate precisely the potential savings from choosing a pay as you go auto insurance policy, since they will depend on a variety of factors, including individual driving patterns. However, Progressive, which offers pay as you go auto policies, claims that customers who drive less than 10,000 miles a year may save up to 25% on their auto insurance premiums relative to premiums for traditional auto insurance.
2. Pay as you go policies that allow the auto insurance company to monitor driving habits may encourage safer, more defensive driving.
3. Some advocates of pay as you go car insurance policies argue that, in addition to saving money, they could help to save the environment by giving policy holders an incentive to drive less. Less driving could mean less gas usage and reduced greenhouse gas emissions from cars.
Cons of pay as you go auto insurance include the following:
1. The mileage limits on pay as you go policies are too low for many drivers.
2. Many people object to the Big Brother aspect of pay as you go policies. The auto insurance company may be able to tell not just how many miles you drive, but when you drive and how you drive and, as a result, there is a loss of privacy with this product.
3. Pay as you go policies are not yet available everywhere and the number of companies offering them is limited, although it appears this may change in time.
While a pay as you go auto insurance policy isn’t right for everyone, it might be ideal for you if:
1. You drive infrequently and/or for short distances and, therefore, don’t rack up many miles each year.
2. You expect to continue to put relatively few miles on your car each year.
3. You are on a tight budget and need the lowest possible auto insurance premium.
4. You are willing to let your insurance company monitor your mileage, even if it requires that a device be installed in your car.
5. You care about the environment.
www.edf.org, Drive less, pay less for insurance
www.ohmygov.com, Is pay-as-you-go car insurance a viable alternative?
autos.aol.com, Big Brother, Big Savings – AOL Auto