When compared to other types of car insurance policies, pay as you drive insurance is relatively new. While about two thirds of all states in the country now allow some type of pay as you drive insurance, this type of coverage is not yet available everywhere. Pay as you drive car insurance coverage is designed to allow drivers to pay insurance premiums based on the number of miles they drive rather than based on traditional factors such as national averages for accidents, claim amounts and vehicle costs.
When you purchase a pay as you drive car insurance policy, you will usually be required to pay a deposit based on an estimate of the number of miles you drive during a given period. Most companies will ask you to estimate how many drive miles you drive every month, every quarter or every year.
If the insurance company accepts your application for pay as you drive coverage, you will probably be required to purchase some sort of monitoring devices in order to track the number of miles that you drive. Many insurance companies will sell you a GPS like device that records your mileage information and relays it to a mileage monitoring service. The monitoring service will then in turn transfer the data to the car insurance company which will use the information to calculate future premium rates.
Depending upon the number of miles you have driven your vehicle during the initial coverage period, you may be required to pay additional premiums if you went over your initial mileage estimate. If you drive fewer miles than had previously been estimated, some insurance companies will allow you to be credited for the difference and have the credit applied to your next premium payment. Your car insurance company will then probably request a prepaid deposit more in line with the actual number of miles that you have driven up to that point.
If you don’t mind the upfront cost of the mileage monitoring equipment and don’t drive your car very far very often, then pay as you drive insurance can save you some money versus standard car insurance policy types. However, before you purchase a drive pay as you drive insurance policy, there are some other things you should consider.
If you sometimes need to make unexpected trips that require you drive a high number of miles, you may actually wind up paying more for this type of coverage than with other types of car insurance policies. Also, if you’re the type of person that is concerned with high levels of privacy, this type of coverage may not be appropriate for you as the monitoring services may be able to track your location at any given time. This has also raised concern with many privacy advocates as they fear that insurance companies may use driver location information for purposes other than those disclosed to the insured driver.
Before purchasing a pay as you drive car insurance policy, you should make sure that you ask a lot of questions to the agent or car insurance company. You should ask them about the types of monitoring equipment that might be required as well as the cost for the equipment and costs for monthly monitoring fees. Also, you should ask them about information that is gathered other than mileage data and ask them how that information is used.