Pay-As-You-Drive Auto Insurance

Pay As You Drive Auto Insurance, frequently listed as PAYD insurance or usage based auto insurance, is the newest car insurance offering on the market today. Usage based policies are available in 27 states, with more adding the feature all the time.

How Is It Different From Traditional Car Insurance Policies?
The idea behind pay as you drive insurance is to reward drivers who drive less often, who are “safe” drivers, and who drive only locally. The idea is that this profile of driver is less likely to be involved in an accident and should be rewarded through lower auto insurance premiums.

For Whom Is Usage Based Insurance Best?
Usage based insurance is great for people who drive less than 30 miles per day on average, such as someone who works from home, someone who mostly uses public transportation (driving only occasionally), a stay-at-home parent who just drives the kids to school or practices, a person who has a company vehicle for which his company pays the insurance and who drives his own vehicle rarely, etc.

How Are Pay As You Drive Car Insurance Premiums Set?
PAYD insurance establishes your car insurance premium based on a combination of three factors – how often you drive (frequency), how far you drive (distance), and how long you drive (time). Some policies will even weight your driving style (e.g. number of hard brakes) or when (more accidents happen at night than during the day).
How Are These Factors Recorded?
Your car insurance company monitors your vehicle usage through a small transmitter you place on the vehicle that measures time driving, number of hard brakes, distance driven, speed, time of day, or whatever variable your specific car insurance company chooses to base its usage based policy.

How Much Does It Save Me?
Usage based car insurance saves the average customer 30 percent off his premium – in some cases, even more. You may also be able to save money through governmental incentives that discourage unnecessary driving, such as a tax benefits (this depends on your state). Many companies offer ways to integrate your usage based tracking device with other technologies, such as your cell phone or GPS, and offer services in tandem for a small fee, such as satellite navigation, traffic direction, breakdown assistance, accident assistance, and theft recovery.

What Are The Drawbacks?
Obviously, you are opening up a huge amount of data to your car insurance company. While you may benefit from this monetarily, some consumers are concerned about potential privacy issues. Some usage based plans will charge policy holders extra for speeding, abrupt lane changes, or driving in a manner the device interprets as being careless.