Pay-As-You-Go: Car Insurance

We’ve all heard of pay-as-you-go mobile phones and now pay-as-you-go car insurance works in the same way – with the same benefits and drawbacks. Just as with mobile phones this pay-as-you-go service works on a monthly basis and you pay depending on the amount you drive.

Pay-as-you-drive:

A car will be fitted with a device which sends the details of your journeys through satellite to your insurance company, and then at the end of the month you will receive a bill with your mileage calculated and how much you owe.

This pay-as-you-go car insurance could be extremely beneficial for drivers who only travel infrequent short journeys as they could save up to 40% off the price of their car insurance policy. However, like most things there is a downside, and in this case if you drive a lot and have to commute to work you will be paying a much larger insurance premium.

This type of insurance is likely to help the congestion problems on major roads, mainly during rush hour – as less drivers will want to pay more for their insurance so will opt to use public transport instead of clocking up the miles in their car, which they will be paying for at the end of the month.

One notable drawback is that people may find this type of insurance deal financially unstable as the bill amount of each month will fluctuate with car usage, causing some further money worries when it comes to budgeting – during the current recession people don’t need any more finance concerns.

For Young drivers the cover could be a good deal as it offers a comprehensive insurance which can be managed. It is quite common for younger drivers to have reduced cover so as to make the insurance affordable, pay-as-you-go systems can make 

‘As long as young drivers are properly educated about the risks of the road and drive responsibly, there is no reason why they should be priced out of the market. Knowledge is a powerful tool to cut the number of young driver deaths on the road, which currently runs at a shocking 13 a week.

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The cost you will pay varies depending on the type of car you drive, the road type, how often you drive and what time of day you drive at. Also if you only want to take out insurance for a limited time with pay-as-you-go you can do it- simply use it when you want it and cancel it when you don’t, without any cancelation fees.

Pay-as-you-go insurance is aimed at reducing the number of unnecessary journeys that motorists take every day, changing the driving habits of hundreds of motorists in the UK. Travelling at 70mph on a motorway is cheaper than driving at 30mph in a town, so depending on what roads you drive on will be reflected in the price of your bill.

Unlike mobile phones you aren’t limited by what models you can to have and you're unlikely to run out of "credit," mid-way through a drive. While you're only paying for the time you drive you will be covered comprehensively for those times that you are not.

- K.J.N -