If you don't use your car very often, you could save money by taking out a pay as you go (or pay per mile) car insurance policy and getting cover just for the miles that you drive.
Is pay as you go insurance right for you? Read out guide to find out.
What is pay as you go insurance?
With pay as you go car insurance, you only pay to be insured for the actual time you spend driving, rather than being covered for the whole year, regardless of how many miles you drive or hours you spend behind the wheel.
Pay as you go insurance policies often use telematics to record your mileage and charge you a premium based on this data – the lower the mileage, the lower the premium. This is because the less you drive, the smaller the likelihood of you being involved in any kind of accident on the road.
How does pay as you go insurance work?
As mentioned before, pay as you go car insurance usually uses telematics or a black box to record your driving habits and set you premiums accordingly.
Telematics technology works by means of a small tracking device (known as a black box) being installed in your car. This device records your mileage, as well as other data about how you are driving such as adherence to speed limits and regularity of braking and cornering.
A profile of you is built up as a driver so that the cost of the insurance policy you are offered isn’t just based on statistics about the age group you belong to which, for younger drivers, unfortunately imply high risk.
With a pay as you go policy, you can increase your savings simply by either reducing your mileage or getting the bulk of your driving done during ‘off peak’ hours. Which hours count as off peak will depend on the insurer, but generally it’s late at night or very early in the morning.
While most pay as you go insurance consists of telematics insurance policies, there are other types of pay as you go car insurance that you should be aware of:
- Pay per mile insurance: Also uses telematics technology, but only to record how many miles you drive. While traditional car insurance policies will require you to give an estimate of your mileage, pay per mile insurance policies ensure you are more accurately charged for just the amount you drive.
- Pay her hour insurance: Similar to pay per mile insurance, but you’re charged for the amount of time you spend on the road rather than the number of miles you drive. Also uses telematics technology. However, both pay per hour and pay per mile come with a flat rate that you must pay even while your car is not in use.
- Temporary car insurance: Also known as short term car insurance, these policies work in a similar way to traditional car insurance (mileage estimates, no telematics etc), but can be taken out for as little as an hour up to a month.
Will pay as you go insurance save me money?
If you can keep your mileage down and drive only, or at least mostly, at off peak times, then a pay as you go insurance policy will definitely save you money.
But if your circumstances should change and you find yourself being forced to drive more, you’ll find your costs going up, potentially to higher than they would be with a conventional car insurance policy.
Also, if you’re found to be an unsafe driver, for example if you break the speed limit or don’t slow down enough before turning, then your premiums may increase with a telematics policy.
Should I get pay as you go car insurance?
Pay as you go insurance is great for drivers who spend little time on the road – as they will benefit from cheaper premiums.
Telematics insurance policies in general are one of the best ways for young or newly qualified drivers to keep the cost of their insurance premiums down if they can demonstrate their care and ability behind the wheel. Car insurance is especially expensive for younger drivers as they’re statistically more likely to be involved in accidents, so proving to your insurer that you’re a safe driver with a telematics policy can significantly reduce your premiums.
Motorists with either a driving or criminal conviction are also generally faced with higher car insurance premiums, so too can benefit from a pay as you go policy if they can prove to be a safe driver.
What other steps can I take to get cheaper insurance?
As always, there are lots of other things you can do to ensure cheaper car insurance premiums. These include:
- Choose the right car: Resisting the temptation to get behind the wheel of a high-performance car is also crucial if you want cheap cover. Buying a car that falls in one of the lower of the 50 Insurance groups will dramatically reduce the cost of your policy. Smaller, less powerful cars are those that tend to be cheaper to insure, as they are less likely to be involved in accidents on the road.
- Increase security: If you can prove to your insurance provider that you have measures in place to increase the security of your car, then you could be rewarded with cheaper premiums. Ways of doing this include parking your car in a garage overnight instead of on the road or installing an immobiliser or alarm to deter thieves.
- Increase excess: All car insurance policies will come with both a compulsory excess and a voluntary excess. You will have to pay these excesses if you want to be paid for any claim. While you can’t change the compulsory excess, it’s up to you to set the voluntary excess. The higher you set it, the lower your premiums will be, but be careful not to set it too high so that it becomes affordable to make a claim in the first place.
- Advanced driving courses: Another great way to both demonstrate your capabilities as a responsible driver and to get cheap car insurance is to take an advanced driving course, such as a Pass Plus test. It doesn’t cost a lot or take much time, but it can be an invaluable tool on the quest to cheap premiums.
- Compare car insurance: Last but not least, the quickest, simplest and most effective way to get cheaper car insurance is to compare policies online. You can easily compare car insurance deals with Money Expert now. All you need to do is provide us with a few details about yourself, your car, your driving history and the type of policy you want. Choose a deal that suits you, confirm the purchase, and enjoy your cheaper car insurance premiums.