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In many states, you have to maintain a certain level of car insurance coverage in order to be able to drive legally, but with many households taking a financial hit due to the economic downturn that has hit the country, paying for car insurance is an expensive monthly charge.  Some car insurance companies have taken this into account and have started to offer pay-as-you-drive insurance coverage, where driving less each year equals a lower insurance premium each month.

How Does It Work?

To participate in the pay-as-you-drive insurance program, the driver must obtain an electronic monitoring device that allows the insurance company to monitor the mileage that is being placed on the car each month.  Depending on the amount that the person drives the car each month, they could realize a savings of up to 54% off of the regular insurance rate for their age, car, and driving history.

The program is designed to be a fair alternative to high insurance rates for people that do not drive a great deal during the year.  The program is great for people that regularly drive less than 8,000 miles per year, such as people that have a short commute to work, regularly take the bus or subway, or work from home with a job that does not require a great deal of driving.

Things To Consider

Many people are wary about signing up for the pay-as-you-drive program because the electronic device that is added to the car can monitor more than just the mileage that is being placed on the car.  People are skeptical about allowing the monitoring device to transmit too much information about their driving habits to the insurance company and do not believe that the information that is not related to mileage that is transmitted to the insurance company will not be used against them in some way in the future. 

Although the insurance companies that offer these programs say that the information that is obtained from the devices will not be used in any way other than disclosed in the program’s terms and conditions, many people believe that their privacy concerns are justified and will not give the insurance company an opportunity to obtain information about their driving habits.  These companies already use personal information about you to determine how much of a driving risk you will be, including where you live and your personal driving record, so it is not a stretch to believe that any other information that is willingly submitted to the insurance company will be used in the same fashion.