With American drivers and consumers looking to tighten their belts wherever possible, some auto insurers have set up policies that arrange for cutting out some of the unnecessary expense by letting drivers plan their own specific policies around the mileage that they use—this practice, called “pay as you drive insurance,” is popular with drivers who need to have a car on the road only occasionally, and do not want to pay for unlimited coverage.
Pay as you go insurance is great for some drivers, but there are some potential problems with it from a consumer perspective. Here are some of the down sides to taking out a pay as you drive insurance policy to help keep auto costs under control.
- Surcharges – although the goal of a pay as you drive insurance policy is to lower premiums, some less scrupulous companies will simply give with one hand and take with the other—in the form of usurious surcharges for anything and everything. Take a good look at the total bill before assuming that pay as you drive insurance will get you a super deal.
- Paying for high tech equipment – a pay as you drive insurance system uses fancy new gadgetry to record mileage on a vehicle and report it to the insurer. Some policies will include charges for this gear, putting the burden of cost on the driver. This can also negate the savings from switching to a pay as you drive insurance policy.
- Regional limitations – pay as you drive insurance is only available in some areas and may not always be an option for drivers.
- Data Collection – some drivers are not comfortable with yet another tracking system for their lives. Drivers who like to go places without computers keeping detailed records of everywhere they go will likely decline to take out pay as you drive insurance policies.
- Unexpected mileage – unexpected mileage is not good for a pay as you drive insurance policy and can trigger additional charges. Since it’s hard to always know how many miles a driver will use, this can be an unsavory aspect of using a pay as you drive insurance policy to control costs. In some situations where a car is only used for commuting, fixed mileage can make sense, but when the car is multi-use, using a low mileage policy can become a disaster.
These are some of the major issues with using this new type of insurance to control household expenses. Pay as you drive insurance is great for some drivers, but awful for others. Take all of your mileage into consideration and do the math to see if a particular driver can benefit from taking out this kind of policy to curb high insurance premiums.