Imagine paying car insurance premiums that were tied to the number of miles or hours you drove, so the less you drive, the less you pay.
That is exactly what pay-as-you-drive (PAYD) insurance pricing does--on top of the usual pricing factors, it links premiums to how much you use your vehicle. Traditional car insurance is priced such that it offers no incentive to cut down on driving.
PAYD insurance is good for budgets, the environment and safety. The more you drive, the higher risk you have of being involved in an accident. More driving also adds to traffic congestion and pollution. Mileage or usage-based insurance provides a strong incentive to drive less, helping to ease congestion and reduce tailpipe emissions while preventing accidents and saving you money.
There are interesting statistics in support of PAYD insurance. Brooking Institution report estimates that if all motorists bought accident insurance per mile, rather than conventional, lump-sum insurance the following would occur:
-Driving would decline by 8% nationwide, translating into a savings of about
$50 billion to $60 billion a year in driving accidents and other car-related
-Total U.S. carbon dioxide emissions would go down by 2% and oil consumption
by about 4%, helping to stabilize our climate and reducing America's
dependence on foreign oil.
-Two out of three households would pay less for auto insurance, with each of
those households saving an average of $270 per car.
Currently, PAYD insurance is available in some capacity in 34 states and in
many foreign countries including Israel(Aryeh), the Netherlands (Polis), United Kingdom (Coverbox), South Africa (Hollard), Canada (Aviva) and Japan (Aioi).
With such great benefits why isn't PAYD insurance available in all 50 states? One reason is that many state insurance regulations do not permit PAYD--either by outright prohibition or conflicting requirements.
For example, North Carolina requires that premium charges be stated upfront, which precludes PAYD charges since they vary according to miles driven.
California, for example, is now working on eliminating its barriers to PAYD insurance. The state's insurance commissioner recently announced his intention to draft new regulations to allow usage-based insurance.
Texas recently became the first in the nation to have a "by the mile" choice of auto insurance offered by MileMeter. Traditional insurance offers 15% or less mileage-based discounts that don't typically capture the full benefit of driving fewer miles.
Though most insurers are slowly moving in the PAYD direction, there are some insurers who offer partial pay-as-you-drive insurance including:
-Progressive Insurance offers up to a 60% discount for low-mileage drivers
through the MyRate Program in Alabama, Kentucky, Louisiana, Maryland,
Michigan, Minnesota, New Jersey and Oregon.
-GMAC's OnStar Program offers up to a 54% discount for low-mileage drivers in
dozens of states.
There are many options to meet your insurance needs, premiums can be set:
-Within specific ranges of miles driven (other rating factors are likely to
-By the mile driven (plus other rating factors)
-By hours or miles driven, with adjustments made for time, location, speed or
driving style (plus other ratiing factors).