Pay As You Drive car insurance

by Simon Ward on 06 September 2012  |  3 comments
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Here's a car insurance product that might be an awful lot cheaper for people who don't use their cars much or off-peak drivers.

In 2006, Norwich Union caused a stir by launching a new type of car insurance, called Pay As You Drive (PAYD). It offered insurance based on how often a car was used and when it was driven, with prices starting from 41p a mile, plus installation and monthly fees. It used GPS-based telematics technology to measure these factors via a box positioned in the car.

Two years later, it canned the policy due to a slow take-up. It seems many of us didn't fancy the idea of our motoring being monitored.

Fast forward to today and telematics technology is now far more widely accepted. In fact, it's being offered as a solution to the problem of sky-high premiums for young drivers, who can now take out one of a variety of Pay How You Drive policies. These use the telematics (black) box to report on driver performance and premiums are then based on how safely a person drives. For more on this type of car insurance, read Young drivers and Pay How You Drive car insurance.

However, if you're an older driver and you don't drive that often, particularly if you only drive during the day, you might be interested to know that PAYD has made something of a comeback. Here's what on offer today.

Coverbox

Coverbox offers PAYD policies from insurers including the Co-operative, Allianz and Sabre.

You have to provide the insurer with details such as your age, where your car is kept, how many miles you normally drive and at what time most of your driving takes place. You're then given a monthly premium price. This is then reviewed by looking at data from a white telematics box fitted in your car, and your premium price changes depending on how strictly you’ve stuck to the original details.

You can view your mileage online via your own personalised dashboard. If you're planning a longer road trip, you can temporarily upgrade your policy for an additional charge.

Insure the Box

Launched in 2010, drivers save an average of £500 per policy with Insure the Box, rising to £821 for first-time motorists. Drivers buy a bulk of insurance miles, starting with 6,000, and a small clear box is installed for free behind the dashboard.

Policy holders can earn up to 100 bonus miles per month if they are driving according to the safety rules. If you go over the 6,000 miles, your bonus miles kick in and if you’ve used them all up you need to buy top-up blocks – at a cheaper price than the original premium.

At the moment 60,000 people are signed up to Insure the Box, making it one of the biggest types of black box insurer.  Although it’s primarily designed for young drivers, drivers of all ages can apply.

Pros of Pay As You Drive car insurance

• If you don't drive a lot, your premiums could be far less than a standard car insurance policy.
• It might make you think about the car journeys you make and whether you really need to make them.

Cons of Pay As You Drive car insurance

• If your circumstances change, for example you need to travel further to a new job, you may end up paying more than you would for a standard policy.
• If you drive mostly at night, even only infrequently, a PAYD policy may be more expensive than a standard one.
• Your driving's being tracked – you may see that as a pro, but a lot of people see it as a con.

Shop around

Make sure you shop around before you opt for a PAYD policy, just in case it would be cheaper to go for a standard deal instead.

Compare car insurance policies

Additional research by Rebecca Rutt

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