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Do I need pay as you go car insurance?

Do I need pay as you go car insurance?
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Do you only drive a few miles per year but still have to pay a hefty amount for your car insurance? You might be able to reduce your costs by taking out a pay as you go (PAYG) car insurance policy.

Here’s everything you need to know about this type of policy to help you decide if it’s right for you.

What is pay as you go car insurance and how does it work?

It is a type of policy designed in such a way that you only pay for cover when you’re using your car.

The idea is quite simple. You pay a monthly or a yearly flat fee to cover the basic fire and theft elements of the insurance, and then an extra charge for each mile or hour that you drive.

Like black box insurance, a tracking device, typically a small black box, is fitted into your car. The device tracks and records your driving, including the number of miles or hours covered on the road. The amount you have to pay is then calculated using this data.

What types of pay as you go insurance are there?

Pay per mile insurance

As the name suggests, you pay an amount that’s based on the number of miles you drive during the insurance period.

Pay per hour insurance

With pay per hour insurance, you are charged for the time (in hours) you spend on the road.

Temporary car insurance

Here, you take out a short-term car insurance policy to cover you only for the small amount of time that you’ll be using the car. You can take a temporary policy out for as little as an hour and up to a month.

This kind of insurance can be useful if, for example, you’re borrowing someone else’s car to drive for a short period of time.

Can it save you money?

Yes. With standard car insurance, you usually pay a flat premium regardless of how often your drive.

That means that if you only drive once in a blue moon and only travel short distances (e.g. to go to the local shops), you could be paying more on your car insurance premiums than you need to. With pay as you go, you only pay for the miles or hours that you drive. This can potentially result in lower premiums.

The actual amount you can save will depend on your personal circumstances, including how often you drive. But savings could be substantial. In fact, a study conducted by Finder.com found that that UK drivers could have saved up to 48% (£783) on their car insurance through PAYG in 2020.

Who is it best for?

Pay as you go is not right for everyone, but it could help lower insurance costs for:

  • Drivers who spend little time driving, as they will benefit from cheaper premiums
  • Young drivers who don’t drive often but who still have to pay high insurance premiums because of their lack of experience and increased risk of accident
  • Drivers with driving convictions on their records, who usually pay high premiums

If you belong to any of these categories of drivers, it’s worth considering pay as you go car insurance.

But if you drive every day or for long distances often, you’re probably not going to benefit from pay as you go. You might be better off sticking with traditional car insurance.

How much does it cost?

How much it costs will depend on the insurer, the type of PAYG that you go for (e.g. pay per hour PAYG insurance) and, of course, how often you drive and how long you drive for.

If you think PAYG might be the right move for you, the easiest way to get the best possible rates is to shop around and compare quotes from different insurers. You can use car insurance comparison sites or contact insurance companies directly.

Don’t forget to read the fine print carefully before you sign up for any policy. It’s important to understand exactly what you are agreeing to.

What next?

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