With average car insurance premiums increasing by nearly 20% in 2009, people have found more than ever a difficulty in being able to afford their car policies. With the number of claims on the increase, coupled with higher premium increases over previous years, this trend is said to continue with premium costs rising for the foreseeable future.
With this in mind, car insurance companies have introduced more flexible methods of payment for their client’s premiums in recent years. This includes pay monthly plans spread over eight to twelve months and also ‘pay-as-you-go car insurance’ which is also known as ‘pay-as-you-drive car insurance.
These policies work in a very similar fashion to ‘pay as you go’ mobile phones. In other words, you only pay for insurance as and when you use your car. If your car is left idle for a few days, then you do not pay insurance for that time. Coverage still remains 24 hours a day, 365 days a year. Policies are usually divided into particular age groups, though this does vary between insurers.
Pay as you go car insurance can be beneficial to drivers that use their cars very infrequently, off of main carriageways and in off-peak periods.
To be able to apply for pay as you go car insurance, the vehicle in question needs to be fitted with a GPS (Global Positioning System) device, the cost of which is usually subsidized by the insurer. The GPS device then records the time, date and travel data that the vehicle makes on a daily basis. This information is then sent to the insurer and then the client receives an invoice calculated by the number of journeys that have been made. Again all insurance companies that offer pay as you go insurance vary, however the policy charges are usually made up from the type of road that I travelled on (motorways are cheaper than town roads), the number of miles driven and the number of days of the month the vehicle was used. Charges per mile vary greatly depending on the client’s age and usage.
Pay as you go car insurance will suit some drivers over others. For example, young drivers with high premiums or high performance car owners that use their sports cars as second cars. A young driver under the age of 21 may benefit, especially if the vehicle is not used much. With pay as you insurance the price of premium never exceeds the value that a client would be insured at with a standard policy. Therefore if someone was paying 100 units per month with standard cover, then with pay as you go, the premium would not exceed 100 units, however that person may only incur a real premium of say 80 units for that month. A saving of 20 units for the month. Please make sure to check that this is the case with any particular insurer as all policies can vary.
This type of car insurance is certainly beneficial to particular drivers, mainly those that have a low yearly mileage or are paying a high premium already for whatever reason. However there is a certain disadvantage too. Because the vehicle is fitted with a GPS device and the cars speed is monitored, this data can be used as evidence should there ever be an accident. The data will clearly provide proof if the driver was speeding, which in turn may go for or against the client in the event of a policy claim.
The last benefit of pay as you go car insurance is that it makes the vehicle easier to find should it ever be stolen!
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