There are numerous benefits to acquiring a pay-as-you-go policy, but there also may be some drawbacks.
Similar to a prepaid wireless phone, a pay per mile insurance policy gives the policy holder a balance of miles they can use for a period of time. For instance, a person may purchase 1000 miles per month on their insurance plan. If they go over those miles, they need to either subtract that from the following month or add more to the current month. So, does this affect car insurance quotes?
Reduced costs
According to the Federal Highway Administration, consumers drive 10 percent fewer miles on their car while using pay per mile insurance. This is because the driver knows they’re paying the insurance company for every mile they use and cut back. Fewer miles driven means more money in the pockets of the insured, as well as a cleaner atmosphere because of the reduced CO2 emissions.
Car owners that use fixed-price insurance policies are spending, on the average, $270 more per year compared to pay per mile policy holders, according to a study by The Brookings Institution.
The California example
California’s Department of Insurance approved pay-as-you-go auto insurance policies in 2008, allowing auto insurance holders to save money by driving fewer miles.
CSE Safeguard Insurance’s program, called SAVE, will be offered to Californians starting in January of 2012. In addition to the pay per mile policy, car owners who drive below their estimated miles will receive a reimbursement, according to president of CSE, Pierre Bize. It’s is the fourth company in the state to offer its clients the policy.
“This environmentally conscious program unites economic savings with emissions reduction in an effort to reduce traffic congestion and greenhouse gases,” said California Insurance Commissioner Dave Jones. “I encourage more insurance companies to start offering pay-drive options to policyholders.”
Restrictions and other programs
Certain agencies that offer auto insurance quotes may restrict car owners based on their history. For instance, GMAC doesn’t offer its policies to every state and requires that the driver average fewer than 15,000 miles per year.
Progressive gives its policy holders a device that records how often and how much the car is being used and sends the information back to the company. Clients can save up to 25 percent on their current car insurance policy by using it.