Traditional vs pay-as-you-go car insurance

With the rise of price comparison websites and combined trend of the general public to research far more thoroughly before they commit to a policy, the car insurance industry is undergoing a time of tough competition. Additionally, drivers today are also offered the option of pay-as-you-go or pay-as-you-drive auto insurance. So what are the pros and cons of this variation compared to your traditional insurance policy?

Pay-as-you-go car insurance essentially covers you and your vehicle for exactly the times you drive. It takes into account whether you drive at peak or off-peak times and what type of road you drive on; and you pay in relation to when, where, and how long you drive over a monthly period. This has been heralded as a great option, specifically, for younger drivers who are in the more expensive insurance bracket, but who drive infrequently in comparison to the average – and at off-peak times.

However, it must be acknowledged that in order for your insurance company to record exactly when and where you are driving, you must at first have your vehicle installed with a device, not dissimilar to a GPS system, that can track the position and speed of your car and send back the information to your insurance company. Often, but not always, these are available at an additional cost.

The most positive aspect of pay-as-you-go car insurance is the accuracy by which it records your journeys. For instance, if you spend the majority of the month driving at 70mph on the dual carriageway only at weekends – you are then not charged for the increased risk of driving in a 30 zone during the working week. This is then an incentive to keep aware of the money you might be spending on a journey by journey basis, and may mean that you use your vehicle less to make those small trips to the local shop.

Despite this, the pay-as-you-go option may certainly suit some drivers over others. For example, more mature drivers may already be receiving unbeatably low premiums, and for others it simply may not be convenient to drive away from ‘high-risk’ roads at off peak times. There are other benefits frmo having the device installed, however, such as making your car easier to track should it be stolen. Yet, some drivers may not like the idea that their insurance company are also aware of your driving habits right down to how often you break the speed limit, and should you need to make a claim, this information might not work in your favour.

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