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Is Pay-As-You-Drive Insurance Worth It?

Most states now require that a driver have valid car insurance before he or she can drive. If a person buys a new car, they can’t drive it off the lot, unless they have insurance coverage. In most states, a driver must have insurance coverage before he or she can even register the car. Since insurance is generally a must-have, one has to do some shopping around to find the best insurance rates. 

For those that are uninformed, there is an insurance called, pay-as-you-go insurance. This insurance is also known as, pay-as-you-drive (PAYD), usage-based insurance (UBI), pay how you drive (PHYD), and mile-based auto insurance. These types of insurance were created to cut the cost for drivers with certain driving habits, and low driving mileage. Even though this type of insurance is available to most, is it worth it?


Pay-as-you-drive insurance allows those who drive less, to pay less. By lowering the premium, one pays less each month or every six months, for insurance. Since this insurance is based on driving habits, one can use their good driving history to their advantage. One can also work towards a better driving future, which can also help to lower insurance costs. If a driver fits the mold, he or she will be rewarded through this type of insurance. The biggest reason this insurance is chosen is the cost, simple as that. Because of the potential smaller cost of insurance, it attracts many drivers. Depending on driving history, one can save as much as 30% on their insurance costs by utilizing pay-as-you-drive insurance. Brookings Institution, which is based in Washington, estimates savings of $270 per vehicle, per household, using pay-as-you-drive insurance. Since cost differs for many factors, actual quotes cannot be provided, but the possibilities of saving money, is obvious.


Lower cost can come at a high price, sometimes. Certain companies will use an insert in the car to track driving practices. To get that lower cost, the driver may have to give up some of privacy, in order to allow insurance companies to monitor driving. If a driver doesn’t currently have a good driving history, it may take time to accumulate a good driving future, thus putting off the low cost insurance temporarily. 

If a driver has a bad day, and he or she speeds, doesn’t stop as necessary, or drives excessively, this can affect negatively, the report sent back to the insurance company through the device. Not all companies use a device to determine eligibility for this type of insurance, but a driver is more apt to get a lower premium by using their device in a vehicle.

Insurance Companies with UBI

There are many insurance companies out there now, that are very reputable and offer, pay-as-you-drive insurance. One of the biggest and most advertised on television is Progressive insurance. Progressive issues a device, which is an on-board telematic device, to track driving habits while a person is in the vehicle. The Progressive program is called “Snapshot, ” and it’s currently available in 45 states. Progressive has stated that 30% of their policies sold directly, are pay-as-you-drive policies. The revenue derived from the Snapshot policy, increased 50% and has netted Progressive $1.5 billion from 2012 to 2013. 

Metro mile, which is based in California, is another company that implements pay-as-you-drive insurance. GMAC insurance, Allstate, and liberty mutual insurance, all have pay-as-you-drive insurance available. To find out if an insurance company has this type of insurance, one must inquire with them directly. Mile-Meter, a Dallas based insurance company, is working with The Texas Department of Transportation to test out this insurance. The Texas Department of Transportation was granted $2 million, just to test pay-as-you-drive insurance, and see if it would help ease traffic congestion.

Popularity of UBI

In the past, a driver usually would give information on his or her driving habits, and would be issued a premium based on those habits, as well is where a motorist lives. With the implementation of pay-as-you-drive insurance policies, it has become popular with many drivers. With progressive insurance reporting a 50% increase in a one-year span alone, shows that pay-as-you-go insurance is gaining popularity. Though this is not a heavily advertised type of insurance, those who learn of it, and only commute short distances, are more likely to utilize it, just to save on insurance costs.

Is It a Good Deal?

If one is just looking forward to saving money, then yes, they should get pay-as-you-drive insurance. You’ll want to be realistic though. If a driver does not have the best driving history, or if he or she drives over 15,000 miles per year, this program may not be beneficial. For those who stick close to home, and only commute a short distance to work, this would be the best type of insurance for your household. By weighing the benefits and drawbacks, one can come to the determination if pay-as-you-drive insurance is worth it.

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