If your car is a necessity but often sits in the driveway unused, you're probably paying far too much for your car insurance. But by simply switching to a pay as you drive policy, you could soon be pocketing some extra cash.
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I confess that I don’t actually own a car. As I live in London and commute to work by train, I have limited use for one.
That’s not to say I haven’t considered buying a car. I often wish I could whiz off for a weekend break at the last minute without having to take public transport! But two little words have always prevented me from actually going through with the transaction, and those words are car insurance.
Many car insurance policies can be extremely expensive, and in my case, because I wouldn’t be using the car on a regular basis, I would be throwing a lot of money down the drain.
But one particular type of insurance policy is now starting to make me reconsider, and that’s pay-as-you-drive car insurance.
What I like about this type of insurance is that your premiums are based on how often and at what time of day you drive. So the less you drive, the less you pay.
This is not a new concept. Pay-as-you-drive insurance has been around for several years now, with Norwich Union one of the first to offer a specific policy. But although it proved popular with many Fools, Norwich Union's scheme was pulled last year due to high costs.
However, in 2009, pay-as-you-drive insurance looks set to make a comeback.
Pay as you drive is back!
Several car insurers -- including Allianz Insurance, Equity Red Star, Groupama Insurances and The Co-Operative -- have started offering pay-as-you-drive car insurance through Coverbox.co.uk, a specialist pay-as-you-drive online broker.
To get a quote, all you have to do is enter your details and provide an estimate of how many miles you drive per week during peak (Monday to Friday: 7.30am -9.30am, and 4.30pm-6pm -- excluding bank holidays) and off-peak times.
What if, after a few months, you find you are driving fewer miles than you estimated, or less at peak times? Your monthly payments will be reduced -- or if you have paid annually, you can receive a refund.
Similarly, if you discover you are driving more often than you estimated, you will have to make a further payment - just as you would with a utility bill.
Big Brother
To track your driving habits and check your estimate was correct, the insurer will fit a Global Positioning System (GPS) about half the size of a DVD case to your car. Using this device, the insurance company will be able to tell:
- how many miles you drive
- what time of day you are driving.
Although the GPS itself is free, you will have to pay an installation fee of £39. On the plus side, this also provides you with theft tracking. Coverbox claims that 98% of cars stolen are retrieved within 24 hours.
Young Drivers
The good news is, there is a Young Driver Free Miles Bonus if a young driver remains claims-free over 3 months.
The bad news is, young drivers will be charged more than other drivers if they drive in the 'super-peak' time between 11pm to 6am.
This is designed to encourage young people to leave their cars at home during the most dangerous hours on the road.
Top tip: If you are aged 18-25 and only drive during the day (between 6am and 11pm), then you might also want to check out More Th>n's pay-as-you-drive policy (called 'Drivetime'), as well as Coverbox, to ensure you are comparing the whole of the market.
The pros and the cons
The most obvious benefit to pay as you drive car insurance is that it could save you money if you don't drive very often at peak times. In particular, younger people could save some serious cash, given they typically face higher insurance premiums.
What’s more, it should encourage people to drive at less and at safer times, and this should reduce road accidents. To top it off, the less frequently you drive, the more you help the environment!
But on the downside, you may not feel comfortable with the idea of someone watching and tracking your every move. This Big Brother effect could act as a major deterrent to potential customers. That said, this wouldn’t personally bother me, providing I was saving some cash!
Don’t forget...
Although I think pay as you drive car insurance policies are a great idea, they are not for everyone. Just because they can be tailored towards your needs doesn’t mean you will definitely be getting the best and cheapest deal, especially if you drive a lot or often at peak times.
So before you sign on the dotted line, make sure you compare a range of car insurance quotes to ensure you’re getting a deal right for you. Good luck!
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