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Seneca once said "What difference does it make how much you have? What you do not have amounts to much more."

Save big with pay as you drive auto insurance

Pay-As-You-Drive (PAYD), Pay be mile or usage based auto insurance programs are growing since they offer large discounts, sometimes over 25%. A study by the Brookings Institute estimated 2/3rds of households would save $270 per car. PAYD based insurance depend on type of vehicle used, and measures against a driver's time, distance and place. Pay as you drive (PAYD) means that the insurance premium is calculated dynamically, typically according to the amount you drive.

Traditional car insurance also charges you based on use, but uses a range of mileage, say 0 to 5k miles for the lowest rate, an additional surcharge from 5-10k miles, in a higher rate still for 10-15k miles driven. And many companies still don't verify mileage, so it's based on an honor system. And this ain't exactly Japan. Regular car insurance is not as mileage specific as PAYD.

The below can be tracked by a dashboard monitor and transmitted by cell or RF signal. Types of coverage are based on:

• Miles driven.
• Number of minutes the vehicle is being driven.
• Hard braking
• Speed
• Time of driving

With car monitoring based insurance, driving info is electronically sent to the insurer. Driving habits effect the cost of insurance. Drivers have a huge incentive to drive safe. If a driver reduces miles driven or speed, that would reduce the insurance company's risk. With real time tracking, that change could lower their insurance rates right away.

How Much Can You Save?

Pay-as-you-drive car insurance is for drivers who log less than say 10,000 miles per year. The less you drive, the less you pay, and discounts can range from 5% to 50%. Mileage information is collected by a vehicle tracking system, and your discount grows the more miles you drive.

Companies offering Pay As You Drive Car Insurance

Allstate's, DriveWise device is available only in Illinois, Ohio and Arizona. Safer drivers can save up to 30% by installing DriveWise.

AAA and Sequoia Insurance Co. offer pay-as-you-drive insurance in California, by tracking actual miles driven.

GMAC Insurance, in collaboration with OnStar, offers a discount in 35 states for those who have a GM vehicle equipped with OnStar and drive fewer than 15,000 miles per year. By the end of 2011, GMAC's goal is offer the monitoring in most states.

MileMeter was the first is car insurance company offering pay-by-the-mile auto insurance. They currently only provide insurance in the state of Texas.

Progressive has a pay-as-you-drive program called Snapshot. Snapshot provides discounts of up to 30% per year from its regular car insurance rates. Snapshot is currently available through 25 states. Because each state has separate insurance regulations, the Snapshot is slowly getting approval in each state. Snapshot provides discounts on auto insurance based on mileage, times of day the car is used and hard braking. Driving late at night 12am to 4am a notorious time for accidents and sudden acceleration and stops are warning signals.

Snapshot works only for cars made after 1995 because the device needs an onboard computer and diagnostic port. The device monitors mileage, time of day when the car is driven and driving style. There is no GPS tracking exact location, which has some privacy issues.

Progressive came out with a new survey

State Farm's In-Drive is currently is only available in Illinois. In-Drive is also equipped with a GPS to be used for roadside assistance and not to gather information which is used to calculate rates. The device monitors mileage, turning, speed and acceleration, braking and the time of day the vehicle is being driven, and State Farm markets the device saying some drivers can save up to 50% on their insurance.

Disadvantages of Pay As You Drive Car Insurance

• Prepaid insurance charges for future driving rather than past risk, so it's imprecise;
• Distance based driving may not differentiate highway, city, or country road driving;
• A tracking system may charge less to a slower driver who changes lanes abruptly, or drives in an inattentive or careless manner;
• Some systems may use location tracking, which could unacceptable infringe on driver's privacy;
and
• In the future, vehicle tracking may be used to detect drunk driving.

Written by Craig J. Casey

Financial Writer helping people with their insurance problems on the net since 1998.

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