Taking off in popularity, Pay As You Drive insurance plans for auto owners are, as their name suggests, based on the number of miles you drive your car. The more miles you drive, the higher the premium. The fewer miles you drive, the more you save. In our present economic times, the idea of paying less for this unavoidable expense is quite appealing. However, Pay As You Drive presents a few disadvantages.
First off, if you use Pay As You Go, you have to allow your use of your car to be monitored. Monitoring your mileage is not free, and you pay those costs, not the insurance company. Especially if you have a GPS device installed, the costs of monitoring can be greater than the savings in your premiums. Moreover, if you change companies, you will have to change monitoring devices, too. That means you should think twice before you change companies just to get what appears to be a lower rate.
Second, the companies that make the odometer tracking devices often charge a monthly fee for transmitting the data. So, not only do drivers have to pay for the odometer tracking device to participate in a Pay As You Drive insurance program, but they will also have to pay additional fees. Again, this could possibly strip away any savings benefits gained from Pay As You Drive insurance.
Third, the insurance companies have had an opportunity to develop a completely new price structure when they offered Pay As You Go. This has allowed them to pass off new costs to drivers, again, canceling out the benefits of your careful and frugal driving.
There are legitimate concerns about how your odometer data may be used. The devices that provide mileage numbers can be modified to tell you the company not just how many miles you drive, but where you drive, when you drive, and how often you go there. This information might be used to justify increasing your premiums, or it might be passed on to third parties for entirely different purposes, none of which is likely to be to your advantage.
Supporters of Pay As You Drive plans assert that driving less will result in fewer accidents. However, the correlation between miles driven and number of accidents is not necessarily simple. Low-mileage drivers are not necessarily safer drivers. It is just as easy for a Pay As You Drive driver to get into a crash as a driver covered by a more traditional insurance program.
On the surface, the cost savings of Pay As You Drive seem quite attractive. Drivers who are considering Pay As You Drive, however, should ask detailed questions before signing up for the plan. Gather as much information as you can to determine whether Pay As You Go is really right for you.
Tom Martens is the content syndication coordinator for Carinsurancesa.co.za. South Arica?s leading car insurance portal.
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