Benefits of pay as you go car insurance
Pay-as-you-go insurance falls into two discrete types: day insurance and policies based on your driving pattern which adjust premiums accordingly.
The first model is straightforward: day insurance allows you to cover a vehicle for a short period (typically one to 28 days) rather than a whole year. This could allow you to borrow a friend’s car, perhaps while yours is in the garage, or cover a car you are interested in buying so you can take it out for a full test drive.
The more dynamic pay-as-you-go type uses telematics - electronic monitoring of your car’s use - to help the insurance company calculate the risk. It may be based on just the mileage you drive; it could also track location and timings - and therefore monitor speeds. This is done through a black box - a piece of clever electronics fitted to your car - or even your mobile phone.
This sounds awfully Big Brother...
Telematics is used to monitor a driver’s use of the vehicle but for higher risk drivers - young, inexperienced and previously convicted - it can help to bring down premiums. It allows insurance companies to gain a clearer picture of your driving patterns and therefore help lead to lower insurance costs if you minimise your time on the road and drive carefully.
Pay-per-mile
With annual insurance, you’re asked to estimate the mileage you’ll cover in the coming year. Pay-per-mile uses a black box telematics to determine your exact mileage. There will be a basic rate to cover your car while it is parked plus an additional amount based on the distance you drive.
Pay-per-hour
Similar to pay-per-mile, pay-per-hour uses a black box or smartphone app to monitor and transmit vehicle usage data. Again, you will pay a flat rate plus additional amounts depending on your vehicle’s usage.
Monitoring driving style
A black box connected to you car can also be used to monitor driving style. So in addition to how much you use your car, information on how fast you drive, how hard you brake and accelerate, your location and therefore adherence to speed limits will all be logged. Drivers are scored on their driving style; the more safely you are perceived to be driving, the lower the premiums. You will also receive feedback to help improve.
Types of insurance
Like standard annual premium policies, pay-as-you-go is usually available with comprehensive, third party or third party, fire and theft. And like any regular policy, you should be able request the usual add-ons such as legal cover, additional drivers and windscreen cover.
Like any insurance policy, you will have to provide full and accurate details including your driving history, the car and of course the period of cover required. Falsifying any information could leave you uninsured and on the wrong side of the law.
*Photo credit: DVSA Crown Copyright