New Type Of Vehicle Insurance – Pay-As-You-Drive (Payd) Policy

Vehicle insurance is not getting any cheaper, as any American can testify. This is of course due to inflation. And as insurance costs are driven higher as the years go by, insurers also get smarter by the day. Fortunately they’re not using their wits to squeeze the last dollar out of us this time. They’re actually helping some of us who are underutilizing our cars save up on our vehicle insurance.

Currently we car owners have to pay for our vehicle insurance coverage even though some of us seldom use our cars at all. Essentially, we are paying for what we don’t use – yet we still have to bear the same burden of paying the full auto insurance bills, month after month.

All along, car insurers have rewarded drivers who keep their overall mileage low. However, mileage is just one of the many factors that they use to calculate our vehicle insurance premium. It’s true that we actually pay less, yet we’re still paying for days that our vehicles are kept in the garage. How nice would it be if your insurance bills only start when you start driving, and stop whenever your car stops moving?

Enter Pay-As-You-Drive policy. This new idea is also called "usage-based" insurance. The premium for this type of insurance is based on the number of miles that you drive. Finally, you can pay to insure the exactly number of miles you drive. But how will the insurance companies know how many miles each vehicle covers?

A device that’s installed in your vehicle records the mileage covered by your car and this information allows your rate to be calculated – purely based on the mileage your car covers. The less you use your automobile, the lower your premiums or payments will be.

Insurers estimate that drivers who utilize their cars below 15,000 miles would experience the greatest benefit. This will encourage drivers to change the way they commute – by taking public transport or by car-pooling. Environmentalists also love this idea since there’s a potential that emission levels may go down.

Unfortunately this new idea is not as popular as it ought to be. The technology used to implement this concept needs to be reliable and tamper-proof. Drivers who adopt this policy must also be willing to allow their driving behavior to be observed (and possibly recorded) by their insurance companies. So far it seems many drivers are not willing to give up their privacy in exchange for some savings.

Obviously, the ones who really benefit from this policy are drivers who live in the city, because they do not have great distances to cover in order to commute to work. On top of that, these urban dwellers would likely be living near train stations or along public transportation routes so can utilize these avenues to get to their work place while they use their vehicles for other purposes.