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Pay-as-you-go Car Insurance

Americans love to spend money, but nobody likes to throw their hard-earned cash out the window. If you've found yourself cutting back on gas expenses by driving less or working closer to home, there may be another way to reduce your monthly car insurance rates. Pay-as-you-go car insurance has picked up in popularity over the last few years as modern technology has allowed insurance companies to track the how much a car owner drives and charge insurance rates based on the miles.

In the past, car insurance companies have generally offered discounts between 5 and 10 percent for drivers who are on the road less frequently. With better tracking, companies are now offering discounts between 25 and 50 percent off premium prices for drivers who only use their vehicle for a few thousand miles per year. However, this practice doesn't necessarily apply to most drivers who use their vehicles regularly.

Risk profile

The reason car insurance companies are now offering these discounts for pay as you go has to do with the lowered risk factors associated with a car owner who drives less. Drivers who are on the road less are less likely to get into an accident and file an insurance claim. For this reason, insurance companies consider low-mileage drivers to be less of a risk.

To figure out if a pay-as-you-go insurance policy is right for a car owner, it's important to assess how frequently the car is driven and how much can be saved. It's important to remember that discounts that might apply for driving less on a regular policy can still add up to major savings.

The gadgets

One of the biggest drawbacks to the pay-as-you-go plan might be the expensive equipment required to track how many miles are driven. Some programs by insurance companies might charge a certain amount every month to pay for an installed device in a vehicle that monitors the number of miles driven. Newer vehicles might be outfitted with GPS navigation that can easily be connected to an insurance company's system to keep track of miles driven, but older cars will probably need to have new technology installed.

Other services such as OnStar - which can also keep a record of driving history - can run as much as $200 per year. This additional expense might outweigh any savings that can be made with a pay-as-you-go insurance plan. In addition to paying extra fees and expenses, not all vehicles may be eligible for these types of monitoring programs, especially older vehicles.

Exclusive offers

Another drawback to pay as you go is that it isn't offered to all drivers or in every state. As a relatively new program, it has yet to be approved in every state. Even in states where the program is offered, only a few companies might have policies that can provide savings. For this reason, it is still a good idea to shop around between regular car insurance policies that are not based on how often a car is driven.

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Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.
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Insurance shopping simplified

Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.

Insurance shopping simplified

Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.
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