The Disadvantages of Pay as You Drive Insurance

August 3, 2017 · Posted in General Articles on Car Insurance 

Taking off in popularity, Pay As You Drive insurance plans for auto owners are, as their name suggests, based on the number of miles you drive your car. The more miles you drive, the higher the premium. The fewer miles you drive, the more you save. In our present economic times, the idea of paying less for this unavoidable expense is quite appealing. However, Pay As You Drive presents a few disadvantages.

First, in order to use Pay As You Drive, you must consent to have your mileage monitored. Monitoring your mileage is not cost-free, and those costs are paid by the insured, not the insurance company. Especially for GPS monitoring, those costs can outweigh any savings gained by using Pay As You Drive. In addition, drivers have to get a new monitoring device any time they change insurance companies. That reality can make you think twice about changing companies just to get a lower rate.

Second, the companies that make the odometer tracking devices often charge a monthly fee for transmitting the data. So, not only do drivers have to pay for the odometer tracking device to participate in a Pay As You Drive insurance program, but they will also have to pay additional fees. Again, this could possibly strip away any savings benefits gained from Pay As You Drive insurance.

Additionally, insurance companies would have to develop an entirely new payment structure in order to offer Pay As You Drive insurance to their customers. The insurance companies could then easily pass any costs associated with this new payment structure directly onto drivers, again removing any financial benefit gained from Pay As You Drive insurance.

Concerns have also been raised about the data gathered by the odometer tracking devices. Supporters of Pay As You Drive insurance claim the devices will only monitor the mileage necessary to compute the Pay As You Drive insurance premiums, but that could easily change. The devices could be revamped to gather additional data on drivers, including whether they drive, when and how often. This data could be then be passed along to the insurance providers, who could possibly use this information to justify rate increases for Pay As You Drive insurance premiums.

Pay As You Drive fans say that driving fewer miles will result in fewer crashes. However, there isn’t a simple correlation between how many miles you drive and how many accidents you have. Low-mileage drivers do not necessarily drive more safely. It is every bit as easy for a driver covered by Pay As You Drive to have an accident as it is for a driver covered by a traditional policy.

At first glance, the promises of lower premiums for Pay As You Drive seem very attractive. If you are considering a Pay As You Drive policy, however, be sure to ask detailed questions of your authorized insurance agent to make sure Pay As You Drive is really right for you.


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