Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific car insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. She also specializes in automa...

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Reviewed by Melanie Musson
Published Insurance Expert

UPDATED: Dec 2, 2020

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Pay as you go car insurance is a fairly new program released by several insurance companies in recent years. Some of the major insurers have already initiated such a program, such as Progressive’s Snapshot program and Allstate’s Drivewise. Pay as you go car insurance provides policy discounts without sacrificing coverage, making it a very affordable option for some people.

How does Pay As You Go car insurance work?

Whenever you purchase this type of policy, your auto insurance company will provide you with a device that you must install in your vehicle. The device records your driving habits, including your daily mileage, how fast you drive or how sharply you take turns. The device will also keep track of what time of day you do the majority of your driving; more accidents occur very early in the morning or during rush hours, so if you drive more at those times than others your rates would be affected.

The pay as you go policy essentially compares your actual driving habits with statistical information relating to auto accidents. While not all driving habits can be assessed through such a device, it does enable the company to obtain a basic snapshot of your driving abilities. It also accurately records how many miles you drive each year.

Car insurance companies usually assume that you will average 10,000 miles each year and determine your rates accordingly. The more miles you drive annually, the higher your likelihood of being involved in an auto accident. People who drive rarely are able to save money on auto insurance due to their reduced chances of having an auto accident.

The coverage allows you to pay only for the miles you actually accrue, not an estimated yearly mileage. As information from the device reports back to your insurance company, your rates will be adjusted. This means that your rates may vary from one month to the next depending on your driving habits.

Who can benefit from a Pay as You Go car insurance policy?

Several groups of people can enjoy policy discounts by taking advantage of a pay as you go insurance policy:

  • People who work from home or have short commutes
  • People who use the insured vehicle only rarely for special occasions
  • People with safe driving habits
  • People who primarily drive outside of peak driving hours

If you make a regular commute or must travel a lot for business, you may actually end up paying more for a pay as you go policy than you would for a regular insurance policy. You might also not get as many discounts if you drive during peak traffic hours or engage in rough driving behaviors such as sharp turns or hard braking.

How do I buy Pay as you Go car insurance?

Not all car insurance companies have a pay as you go policy option. The technology is still quite new, and while it has become a popular option for some it has not been embraced by all companies. You may also not be able to qualify in some states; insurance companies usually roll out new policies to a limited number of states in the beginning, so you will need to be sure you can take advantage of the program in your area.

In order to check and see if your insurance company offers a pay as you go policy, you can contact your agent or call the customer service number for the company. If the policy is available in your area, you will be asked a few questions to see if you would qualify for the program.

If you do qualify, your car insurance company will send you the device for you to install in your vehicle. Once it’s installed, the device will record your driving habits and report the information back to your insurance company. At that point, you may see your rates begin to drop. Because the rates are calculated based upon your actual driving habits, your insurance may fluctuate from one month to the next.

Depending on your driving habits and other details about your lifestyle, you might qualify for other types of discount, such a safe driving discount or multi-policy discount. When you call to request a pay as you go policy, be sure to ask if there are any other programs you can enroll in that will help you save money on your car insurance.

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