This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

What Is Pay-as-you-drive Insurance?

Question: What is a pay-as-you-drive plan? I only drive 2,000 to 3,000 miles a year. Would this type of insurance program save me money?

Answer: Yes, it's very possible that a pay-as-you drive (PAYD) insurance plan could save you money. Keep in mind, though, besides tracking how many miles you drive, these auto insurance programs also typically monitor your driving behavior before deciding if you'll receive a discount. (See “ Plug in, drive less, save more”)

There are low-mileage discounts available through many car insurance providers, and if you put only 3,000 miles on your car a year you should have no problem qualifying for a discount of between 5 and 15 percent.

To get better discounts (some auto insurance companies tout a discount of up to 50 percent), you'll need to allow the insurance company to track your mileage and monitor your general behavior as a driver.  If your driving patterns show you to be a low-risk driver, you should qualify for a decent discount.

To track your driving style, PAYD insurance programs use either a telematics system already installed in your vehicle, such as OnStar, or the insurer will provide you with a device that plugs into your vehicle.  The plug-in device will report on your mileage, hours of operation, braking and rate of speed.

PAYD plans are not for everyone. If you drive during peak hours, brake hard and/or accelerate quickly, then your discount will likely be rather low -- if one is offered at all.  Many motorists using telematics insurance plans complain that the braking measurement is too sensitive, so one must be incredibly easy with the brakes to obtain a higher discount.

Some insurers have noted that they find drivers are willing to change and improve their driving habits because the information they receive from the telematics device.  If improvement is shown, then the discount can increase for the driver.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs