Disadvantages of Pay as You Drive Insurance
Pay As You Drive plans are one of the most popular innovations in auto insurance of 2009. As their name suggests, Pay As You Drive plans charge drivers on the basis of how many miles they drive. Drive less, save more. In tough economic times, the idea of reducing this one monthly bill almost all of us have to pay is very appealing. However, Pay As You Go has a downside.
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.
Secondly, the companies that make the odometer tracking devices also charge a periodic fee for transmitting data. So, not only do you pay for the device, you pay to use it. This, again, possibly can eat away any savings from driving less when you use Pay As You Go.
Third, the insurance companies have had an opportunity to develop a completely new price structure when they offered Pay As You Go. This has allowed them to pass off new costs to drivers, again, canceling out the benefits of your careful and frugal driving.
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.
Tom Martens is the content syndication coordinator for Carinsurancesa.co.za. South Arica?s leading car insurance portal.
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