Pay As You Drive Insurance

Usage based plans with telematics can help young and high-risk drivers find affordable coverage. Others can get cheap rates too as long as they are not aggressive on the roads and low mileage. They are also known as; pay as you go car insurance, just like the cell phone plans. They can be pretty effective in many ways for so many motorists that it is worth checking. The main concern for most is that you need to allow the carrier to watch your every move with some of them, but not all.

This industry is a very competitive one like many other sectors. Participants feel the pressure to offer good rates if they want to increase customer base. However, this does not mean that everyone will benefit from this competition equally. Good drivers are more likely to enjoy lower and lower rates over the coming years. And a few companies, especially the top ones, would quote expensive premiums for high risk applicants to reduce exposure. Pay as you drive automobile insurance can help when a motorist is struggling to find affordable coverage.

Many carriers have already switched attentions to identifying and rewarding preferred applicants more efficiently. As a result several companies are turning to monitoring technology known as telematics to identify safer motorists and reward them with cheaper prices.

How Does Pay As You Drive Insurance Work?

pay as you drive insuranceToday, eight out of ten top US auto insurers offer PAYD programs that work differently from each other. The pioneers of these types of policies, Progressive, uses a gadget called Snapshot to monitor driving behavior and adjust premiums accordingly. They would send you a little device with instructions as to how to fit it on the car’s onboard diagnostic port.

They are even offering to test it for a month free of charge and see if it will offer you savings and you will be happy with it. If you don’t like it you can take it off and post it back to Progressive. If you decide to go ahead with it they will look at motoring habits, how often you break hard and how many miles you travel and determine the charges accordingly. You will need to keep the device a few months longer for them to determine the renewal price.

The essence of pay-as-you-go vehicle insurance programs is that you allow the insurer collect the information they need to judge driving abilities. They use little devices or onboard computers to monitor them. They then use this information to calculate the premium.

Existing on-board diagnostic solutions are utilized for monitoring, along with below mentioned special gadgets. One or two companies may accept odometer readings you send them regularly. New programs are being tested and existing ones are revised often. So, you may have more options by the time you look for these.

What Information Is Collected for Telematics Auto Insurance?

There are various plans. Several of them want to find out how long you drive, how often you step on brake and what time of the day you like to use the automobile. But some of them just want to confirm annual mileage by using a device that transmit this information only. It is fair to say that companies are trying to eliminate the objections to the system by not looking at the speed and not checking where you have been. However, there are programs that are operated using GPS. So, again you need to check specific offering to make a choice.

Which Cars Are Allowed in Pay As You Drive Insurance Programs?

It is fair to say that what type of an automobile you own doesn’t affect eligibility in general. If one doesn’t provide the solution you may have to go with another one. But you should be able to find one that will accept the auto, providing it is available in your state. However, these are currently only available for private automobiles and not for commercial vehicles.

What Are the Benefits of Pay As You Drive Car Insurance?

The obvious benefit of telematics is that they can be influential in bringing premiums down. It is estimated that about 70% of motorists would be able to save money with PAYD. According to Brookings Institution 2/3 of households would be able to save $270 per car on average should they choose this option. This goes to show that we are being judged harshly by underwriters and charged more than we deserve.

Most of these solutions offer feedback. Some of them set up an online log in system that allows the policyholder see driving information collected in real time. And devices like Snapshot can be set to beep when you brake too hard. This can indicate that he/she needs to watch the traffic in front better, keep a wider distance from the vehicle in front or move less erratically.

So, these devices offer feedback and chance to get better at it. One carrier in Germany highlights this point by naming the program brilliantly as “Mein CoPilot” (My Co-pilot). It is fair to say that wide use of such solutions would boost traffic quality across the country and make the roads safer for everyone.

It may be far-fetched considering the limited availability but there may be broader benefits if all of the US motorists adopted pay-as-you-go automobile insurance. Brookings Institution’s findings are pretty interesting as they estimate mileage would decline by 8% across the country. This suggests that people would be more aware of distances they cover and avoid unnecessary trips. This reduction would cut carbon dioxide emissions by 2% and oil consumption by 4%. They estimate that total savings nationwide, including damages and injuries claims, would be around $50 billion.

Who Can Save with Pay As You Go Auto Insurance Policies?

It is clear that large number of people should consider them if they are available in their states. Obviously the savings will vary depending on many factors. Here are some of the points to help you decide if it is for you.

  • If you already have a proven record it may not help much as you may be getting great quotes already. This would specially be the case if you are traveling a lot annually.
  • On the other hand, you may want to consider pay-as-you-drive insurance when the premium is increased at renewal due to recent accidents and claims.
  • Generally, you would have a better chance of saving money if you are traveling less than 11,000 a year. As a general guidance, the lower the mileage the higher the possible savings.
  • Youngsters are more likely to get cheaper rates. For example, Allstate’s Drivewise offer 10% discounts just for joining.
  • You are given a chance to break away from the usual grouping. For example, if you are a young male driver you will be grouped with your peers who are probably the most dangerous group of motorists. When you have telematics, the premium will be based mainly on how careful you are behind the steering wheel and not on age and gender (which you cannot influence).
  • Many people who used the systems confirm that they consequently become more aware of their actions as they are conscious of being monitored. Anything that helps is a good thing.
  • Countryside motorists and the ones who can avoid rush hour traffic can benefit a lot more from telematics. Perhaps, it is an ideal solution for people over the age of 70 who would see some rate increases otherwise.
  • It would be a good choice for convicted motorists. They are likely to bring down costs by installing a “black box” to let carriers see how they are doing and by making corrections on it a bit. Traffic related convictions will still have a bearing on how much they get charged.
  • If you are often hitting the road between midnight and 4am this may not be for you. Time of the day is another data monitored and this time frame is considered most risky by carriers.

Objections to Usage Based Car Insurance with Telematics

This little apparatus will report on you to the monitoring center. Allowing such device may be seen as invasion of privacy by many people and therefore they may not even want to consider it. That is why companies try to limit the information they collect. Not watching where you have been and speed are steps in the right direction. It is not a good idea to have it in the record that you have broken a few speed limits.

Another obvious concern about telematics insurance is that people are worried the rates may actually go up as a result of bad habits. The 30 day free trial offered by Progressive is a great solution for people who are not sure about the benefits.

Pay As You Drive Auto Insurance Companies

As mentioned above most large carriers offer various solution. Nonetheless, there isn’t any one of them that offers a program across the whole country. Progressive offers the most well-known and wide-spread program and even they don’t offer it in few states.

Allstate has a similar program called Drivewise and they can offer you initial discount (of currently 10%) just for agreeing to it. They use Onstar auto dashboard solutions that allow remote diagnostics solutions to collect information. State Farm is offering similar programs but it is currently available on limited number of regions. Hartford Financial Services is another one running similar type of coverage. A few other carriers may offer mileage based car insurance premium calculations.

Also, similar programs are offered in other countries like the UK, Italy and Germany. Their application can be quite different from the USA. They tend to call the device installed “black box” and it may be a bit more intrusive.

Popularity of PAYD policies are increasing and more and more names provide such coverage options because they are cutting premiums down. According to, here are the names and their plans.

Also, you should keep in mind that many companies offer cheaper quotes based on mileage brackets estimated even though the policy may not be classified as PAYD.

Progressive – Snapshot: Progressive is the pioneer. The Snapshot needs to be fitted to your vehicle so that they can receive time of day, speed and braking patterns. If you avoid traveling at peak accident hours (from midnight to 4 am) you can get good discounts. Motorists can save up to 30% with this application.

Allstate – Drive Wise: This policy product is currently available in 30 states. A plug-in device records motoring habits, which are used to qualify a policyholder for a 10 percent discount for the first term. If people maintain safe habits and low mileage in subsequent terms, it can reach to 30%, according to them.

State Farm – Drive Safe & Save: They receive odometer readings from gadgets like OnStar or SYNC and adjust the premium to reflect the usage. It is indicated that discounts usually range from 10 to 50 percent depending on distance travelled.

The Hartford – TrueLane: A plug-in device records relevant information and transmits it to the insurer. You get a 5 percent discount by enrolling. After 75 days, it could go up as much as 25 percent, depending on the history. TrueLane is currently offered over 20 states.

Travelers – IntelliDrive: You can receive up to 5% immediate discount by installing this telematics. It can reduce premiums by as much as 20% for the best of them, according to Travelers. However, it is not as widespread and currently available in Alabama, Connecticut, Indiana, Illinois, Maine, Ohio, Oregon and Virginia.

Esurance – DriveSense: a plug-in device transmits details through wireless network, which determines if people qualify for discounts up to 30%. This program is now available in Arkansas, Arizona, Idaho, Iowa, Illinois, Massachusetts, Nebraska, Rhode Island, South Dakota and Texas.

Safeco – Rewind: They offer a PAYD for motorists who face higher rates due to traffic tickets or accidents. After evaluating the records monitored, Safeco may reduce or eliminate the premium increases that came because of the recent violations or accidents.

National General – Low Mileage Discount: Their plug-in device monitors much the same data as others do; speed, braking, mileage and time stamps. The company also offers the option of reporting mileage though OnStar. The rate cuts range from 13% for motorists who drive 15,000 miles a year to 50% when it is less than 2,500. The Low-Mileage Discount program is offered in 35 states.

American Family: They recently completed testing of a PAYD model based on a plug-in device. According to their spokesman, Steve Witmer, the research is being evaluated, with the hope that a product will soon be available to customers.

Metromile: A plug-in device tracks just the mileage and you’re billed a monthly base rate plus per-mile charge. You can spend 40 – 50% less than you would with a traditional plan, if you travel less than 5,000 miles a year, according to them. Currently it is only available in California, Illinois, Oregon and Washington.


We should count ourselves lucky that we are offered many options these days. Usage based vehicle insurance is one of those great options to consider if you want more affordable quotes. It is easy to moan about how expensive it is and how they are charging unfair prices. But, you should look at your own actions first and ask why is my car insurance so high? If you let the skills slip from acceptable to dangerous who is to blame? Shouldn’t you accept some of the responsibilities for not correcting mistakes and improving?

Shouldn’t you accept most of the blame for the high premiums if you don’t consider all the options and shop for the best policy attentively? Going for a telematics based policy can save some people up to 50%. And you would be charged more than usual if you stay too long on the roads and you are terrible behind the steering wheel. Next time you need to insure a car you should check all the alternatives and make a smart decision based on knowledge.