If you drive a vehicle, then you have to have auto insurance. Have you ever heard of pay as you drive auto insurance? Pay as you drive insurance means that the rate you pay is determined by the amount of miles you drive. The idea is appearing in the state of California and the first insurers to offer it are State Farm Mutual and the Automobile Club of Southern California.
Studies show that pay-as-you-drive insurance helps to reduce the number of accidents, decreases the amount of greenhouse pollutants in the air and helps drivers save money.
Under the plan, drivers are required to provide to the insurance company their vehicle’s actual mileage when they buy the coverage. In some programs, like State Farm’s mileage, data is automatically transmitted to the insurance company through the OnStar computer-communications system on General Motors vehicles. The mileage is verified by service records from Carfax reports or California Smog Check data. The Auto Club insurance program gives drivers who want it an automatic mileage data transmission device which is installed in the car.
According to State Farm, people who drive their car less than 2,000 miles a year can save up to 45 percent of the cost of their premium during a six month period. The company, the number one seller of private car insurance, says that it expects to have one-fourth of its 3.3 million policyholders in California in the program.
The Auto Club says that its policyholders could save between 1 percent and 10.5 percent depending on how many miles they drive. State Farm will start offering pay-as-you-drive coverage starting on February 28, 2011. The Auto Club will start offering its version of the coverage starting on February 1, 2011.