In a time when every penny counts more than ever, do you know that you could make significant savings on your car insurance by switching to a pay-as-you-go (PAYG) policy? A new study by Finder.com has found that UK car drivers could have saved up to 48% by using PAYG car insurance in 2020.
What is PAYG insurance?
PAYG car insurance calculates your premiums based on when and for how long you drive. You are charged for each mile or hour driven on top of a monthly or annual charge which covers incidents like theft or damage to your car when it’s parked.
Depending on the policy you’ve chosen, some providers might also monitor how safely you drive. If you are deemed a safe driver, this will be reflected in your premiums.
Why is PAYG car insurance cheaper in 2020?
Well, people are driving less this year. This could be because of the lockdown restrictions that have been in place for much of this year. This has resulted in up to 60% of the UK population working from home for at least a part of 2020.
As a result, it is expected that the average mileage per car this year in the UK might reduce by as much as 16%. This does not factor in the November lockdown, meaning that the figure could be even lower.
How much can you save with PAYG car insurance in 2020?
To find out how much drivers in the UK can save through PAYG car insurance, Finder.com used three scenarios involving a low-risk, a medium-risk and a high-risk driver to get the average premium for each based on the 10 most popular cars in the UK in 2020.
They estimated that every driver’s mileage would be 16% lower in 2020 than in 2019.
Ultimately, they found that the high-risk driver would have saved an average of £783 on insurance in 2020. That’s because, under traditional insurance, this driver would have paid £1,628 while with PAYG, the costs would have been £845. This translates to a 48% saving.
The medium-risk driver would have saved £194.
Interestingly, the low-risk driver, whose traditional policy premium is £204, would have paid £305 for PAYG. That’s 50% more. So this driver would actually have been better off sticking with a traditional insurance policy.
Who can benefit from PAYG?
There are several categories of drivers who could save massively on their insurance costs by opting for PAYG car insurance.
Young drivers, for example, are often classed by insurers as high risk due to their relative inexperience on the roads.
Insurers see them as more likely to cause accidents and to make insurance claims than any other age group. This usually means higher premiums for them. PAYG could help lower costs for this group of drivers.
According to Uswitch, drivers who use their cars outside peak traffic hours can also save on their insurance with PAYG. That’s because some insurers charge less for miles driven when roads are emptier and accidents less likely.
Motorists with driving or criminal convictions who also face higher premiums from traditional insurance can also benefit from PAYG.
On the other hand, it would be cheaper for drivers considered to be low risk – for example, older drivers with more driving experience and long no-claims histories – to get the traditional car insurance policy.
In addition, if you drive a high number of miles every year, for example, if your job involves long-distance commutes every day, you might end up paying more on PAYG than with a traditional policy.
Although the final decision is yours, it’s worth taking a look at PAYG car insurance. You can potentially save big on your insurance costs, something that your wallet will thank you for.
The extra money could be put to good use elsewhere. You could also use it to boost your savings. Or, if you can withstand a little risk, you could even invest it in a stock and shares ISA for potentially greater returns.
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