It cannot be denied that many drivers these days are looking for the cheapest insurance coverage, which is the reason why many companies are jumping into the bandwagon of offering cheaper coverage. One of the so-called cheap policy is the pay as you drive structure, which is a coverage based on your mileage consumption. So, what really is the pay as you drive policy, and is it cheap?
Pay as you drive or PAYD insurance policy is no longer a new type of coverage. A handful of states in the US are already using this type of insurance structure years ago. The idea of this policy is to give or reward the drivers have lesser mileage consumption. It is usually carried out by installing a gadget into the car to record the actual mileage and to provide the insurance company with a realistic report rather than pure estimates.
Today, you can find PAYD program in California, which is being offered by different insurance companies in varying fashions. In 2010, the Automobile Club of Southern California and State Farm applied for such structure and were approved subsequently. This move has initiated the other insurance providers to follow the same suit of offering such coverage.
Aside from California, other states are now planning to offer PAYD structure to help their citizens save money on auto insurance based on their actual mileage. For instance, in New York, companies like the State Farm and Progressive who are known to offer PAYD structure in other states are showing their support for the New York government to implement the same program. It is said that if all the drivers in New York would switch to PAYD, there would be a reduction of at least 11%, according to Brookings Institution.
For people who drive less, the pay as you drive structure would surely benefit their lifestyle. This means that they are only to be charged based on the actual mileage rather than paying a flat rate based on mileage assumptions. Also, PAYD may provide an avenue for those owning multicar policies and reward the vehicles that were hardly being driven.
However, PAYD program has also its own setbacks. In order for the insurance company to measure your mileage, a device must be installed on your vehicle. If you pay for the gadget’s installation and maintenance, the cost may defeat the main purpose, which is to save money. And, what if you go over the mileage cap expected from you? This means that you can be charged with additional costs. Either you pay for the excess mileage or your premium costs are accrued. Before using such policy, it is prudent to ask your insurance provider how the excess mileages are handled, otherwise, if the fees or penalties keep piling, it is no longer a cheap insurance.
Again, the only way to verify if pay as you drive program is what you truly need, speak to your insurance provider right away. PAYD may not be a good option if you live far from home and work, or if you drive a lot. Keep in mind that the best car insurance is the one that offers the cheapest rates. Although it is very enticing to purchase PAYD, be careful in assessing its true nature.
