Disadvantages of Pay as You Drive Insurance
Pay As You Drive insurance is taking off in popularity. This insurance program is based on the number of miles you drive. The less you drive, the cheaper your insurance premiums. In the current tough economy, the idea of paying less for what can be a big expense is appealing. However, Pay As You Drive Insurance does have some disadvantages.
First of all, in order to utilize Pay As You Drive insurance, you have to consent to having your vehicle?s mileage monitored. There are costs associated with these monitoring programs. These costs are paid for by the driver, not the insurance provider. These costs could outweigh the potential savings gained from Pay As You Drive Insurance. In addition, drivers would have to install a new monitoring device every time they change insurance providers. That makes Pay As You Drive insurance inconvenient, and it makes shopping for a better deal difficult and frustrating for drivers.
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.
There are also concerns about how odometer data may be used. While it may be true that the monitoring devices will only provide the data needed to compute premiums, there is always the possibility that the monitors could be modified to tell the company not just how far you drive, but where, when, and how often. This information about where you could go could then be used to raise your rates, or for some other purpose entirely.
Supporters of Pay As You Drive plans assert that driving less will result in fewer accidents. However, the correlation between miles driven and number of accidents is not necessarily simple. Low-mileage drivers are not necessarily safer drivers. It is just as easy for a Pay As You Drive driver to get into a crash as a driver covered by a more traditional insurance program.
On the surface, the cost savings of Pay As You Drive seem quite attractive. Drivers who are considering Pay As You Drive, however, should ask detailed questions before signing up for the plan. Gather as much information as you can to determine whether Pay As You Go 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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