Slash 40% Off Your Car Insurance
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Here at The Fool we value our readers' opinions. So, while browsing the comments on the latest instalment of my car crusade, I spotted this pearl of wisdom from Fool reader 4Silvester:
I always cycle to work or use public transport. However I still have my car for shopping trips or long journeys out of town. Twelve months ago I signed up for pay as you go insurance and have cut my annual bill from £600 to around £250. I've saved loads of money and as an added bonus I now think twice before using the car as there is a direct, measurable cost to every journey!*
It got my mind boggling...
Ok, so you don't want to ditch your car. After all, many of us consider our cars as another member of the family. But if you only use your car for the occasional trip, getting a ‘pay as you go' car insurance policy may make sense.
How Does It All Work?
Norwich Union (NU) is probably the best known provider of this type of insurance, and was one of the first to offer a specific 'Pay As You Drive' policy.
A Global Positioning System (GPS) is fitted inside the car for free, monitoring your driving habits and transmitting back to Norwich Union information collected.
Depending on how many miles you drive and when, your premiums are added up, and you are billed each month according to the actual miles you travel.
In addition to paying per mile, you also pay a fixed monthly fee whether you use the car or not. Costs per mile are individual to each driver, as are the fixed service charges.
Cover is fully comprehensive, and is exactly the same as NU's standard car insurance policy. In addition, drivers aged 18 - 23 get the first 100 off-peak miles driven included free each month.
Who's It For?
Norwich Union says that if you drive less than 6000 miles a year, it could cut up to 30% off your insurance bill.
Younger drivers in particular can make savings, as they traditionally face higher insurance premiums. NU claims that 40% of drivers under 23 would save over a third if they went for a Pay As You Drive policy.
But do the sums add up?
As the rates you are charged depend on your age and individual circumstances, prices will differ from individual to individual. However, Norwich Union does have a couple of examples.
Motorists aged between 18 to 23:
Example one: A driver aged 18 to 23 is quoted a regular NU policy, costing £740 a year. Instead, he takes out Pay As You Drive policy. He would pay a fixed monthly charge of £24.38 per month, plus:
Peak Time (11pm - 6am) | Off peak (from) |
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£1 per mile (fixed price)
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3.39p per mile (first 100 miles per month included)
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Source: Norwich Union
Motorists aged 24 to 70:
Example two: A driver aged 24 to 70 is quoted a regular NU policy, costing £350 a year. Instead, she takes out Pay As You Drive policy. She would pay a fixed monthly charge of £11 per month, plus:
Road Type
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Peak rate per mile. Midnight to 5 am, 7 - 10am, Monday to Friday (excluding bank holidays).
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Off-peak rate per mile (all other times)
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Motorway
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0.57p
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0.41p
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Dual Carriage
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0.97p
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0.53p
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Single lane Roads (50/60 mph speed limits)
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2.14p
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1.41p
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20/30/40 mph speed limits
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4.68p
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2.74p
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Source: Norwich Union
As you can see, driving your car during peak times makes the cost of running your car rise exponentially. You could end up being penalised heavily for zipping about during these times, especially if you fall into the younger age bracket.
Also, remember that the miles quoted above are ‘from', and won't necessarily be the price you are quoted.
In fact, a chap at Norwich Union told me that for younger drivers, a charge 3.39p per mile was very low, and quotes per mile were more likely to be around the 5p/6p mark.
However, Norwich Union does give a ‘premium guarantee' for the first year. This means that if your total annual premiums end up exceeding the total amount you would have paid for a regular Norwich Union car insurance policy, the difference will be refunded to you.
More Th>n Insurance?
An even finer niche in the car insurance market is More Th>n's 'Drive Time' insurance policy. Slightly different to Norwich Union, More Th>n's product is specifically aimed at drivers between 18 - 25.
According to their research, 40% of young driver accidents that occur between 11pm and 6am result in death or serious injury, compared to 20% at all other times.
So, if you fall within this age bracket, More Th>n says you could cut up to 40% off your car insurance bill by switching to a Drive Time policy.
Drive Time is a lot simpler than Pay As You Drive, as your trips are not tracked per mile. Like Norwich Union's policy, your car is fitted with a telematics system, only this time it monitors the times you use your car.
You estimate your annual mileage as you would do normally, and are then free to drive without watching the meter.
However, everytime you use the car outside the off-peak hours of 6am - 11pm, you will be hit with a £25 penalty. Doing this just four times in a month will rack up an additional £100 in penalty charges, which could make owning a car a very expensive luxury.
So, pay as you go insurance may be a good idea in principle, but it's only ideal for people who know how much, and roughly when they'll be driving their car.
Perhaps you don't like the idea of Big Brother watching your every move, or maybe you're worried that your driving habits won't always be as stable as they are now.
In any case, just because a specific type of insurance is tailored towards your needs, it doesn't necessarily mean that it will always be the cheapest.
Before you commit to any company, make sure you compare a range of car insurance quotes to ensure you're getting the best deal for your needs.
Because gimmicks aside, it's the numbers which really count in the end.
More: Cheaper Car Insurance In Ten Steps
> Search For A Better Car Insurance Quote!
*Note: This message has been edited where necessary to make it clearer. Click here to find the unedited version.
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