The Pros and Cons of Pay as You Go Insurance

Lots of drivers still don’t know about pay as you go insurance, where auto insurers are pioneering efforts on a product that will allow for more customized auto insurance rates for those who don’t drive their vehicles relatively frequently. Pay as you go insurance has a lot of potential, but it can also come with some hidden costs and consequences.

Here are some of the pros and cons that drivers report on these kinds of limited auto policies.

Benefits of Pay as You Go Insurance

• Lower Costs – The basic idea of these policies is to make auto insurance costs lower for families and individuals. In addition to the lower rates that come with lower mileage agreements, lots of insurers offering this product will include specific discounts for customers who agree to participate. Some kinds of pay as you go, like driveaway insurance, help with one-time transport coverage.
• Incentives for Alternate Transportation – People who have taken out a pay as you go auto insurance policy know that they can save money by driving less. This will give powerful financial incentives for family members to bike, walk or take public transit, so that a household financial situation is tied directly to all of the larger goals for reducing greenhouse gas emissions and improving our environment.
• Mileage Tracking – If a member of a household is trying to track mileage on a business vehicle, pay as you go can be helpful in providing more documentation. Having a pay as you go policy can help with the general recording of mileage for a family budget.

Disadvantages of Pay as You Go Insurance

• Up-front Costs – Some types of pay as you go auto insurance policies require technology that insurers may make customers pay for up front. In some situations, customers can buy or make a deposit on GPS equipment that will track mileage for the vehicle. In other arrangements, customers will have to drive to physical tracking stations on a periodic basis in order to have their mileage checked.
• Privacy – Some people simply don’t like pay as you go insurance because they don’t want others to have information about where and how much they drive. A lot of the GPS tracking involved in these insurance policies includes locational information, and this turns off some potential customers who would prefer to pay more for their driving to be off the record.
• Overage Costs – When a driver signs up for pay as you go auto insurance, if he or she exceeds the stated mileage, it can get expensive. Just like with cell phone minutes or any other rationed agreement, going over on miles can generate per mile costs that can make a policy expensive. It’s best for customers signing up for these limited policies to have a good accurate picture of how much they will be driving in a given time period.

The above items are some things to keep in mind when you are contemplating ways to cut down your auto insurance costs and get more efficient, effective coverage without paying a mint for ongoing auto policies.