Car insurance companies have complex formulas for determining how much your auto policy is going to cost. One factor that they consider is how many miles you drive each year. When it comes to mileage considerations, most insurers break down their policy holders into just three groups -- low mileage drivers, regular mileage drivers and high mileage drivers. Obviously, insurers regard low-mileage drivers as being better risks than drivers that put in more miles each year.
Now though, some insurers are planning on offering a brand new car insurance concept and they're going to calculate driver premiums based completely on how many miles someone drives.
These new policies are called usage-based car insurance policies. Some companies and states call them pay as you drive (or PAYD).
If you sign up for a PAYD auto insurance policy, your insurance company will place a hidden meter inside your car which will keep track of exactly how many miles you drive. These monitors are usually placed under the steering column on your car.
These monitors collect more information than just how many miles you drive. They note how often you use your auto, what time of day (or night) you use it and how fast you drive.
These devices send this data back to the insurer via a wireless connection, where the insurance company blends your vehicle driving details together with other factors, including your age and past driving record, and they come up with a custom cost for your personal use.
If you get lucky and you are a driver that doesn't usually log many driving miles, or doesn't drive during risky times of the day (such as after midnight on Friday), you will most likely get a lower premium. However, if your data shows that you like to drive over the speed limit, or if you drive a lot during the night, you may find your premium higher than what you would like. They may even take into account single incidents where you may have accelerated at unusually high rates or emergency braked.
Many auto insurance companies are trying out versions of the PAYD with their own customers and their own monitoring devices. Companies including State Farm, Allstate, and The Hartford. Progressive has been offering a meter-based policy they call MyRate for several years.
If PAYD sounds like it might save you some money, be sure to ask your current insurance agent about it, or if your current company doesn't have this type of plan, the savings to you might even be big enough to switch to a different insurer that currently offers such a policy.
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