Every heard of pay-as-you-go car insurance? If not, don’t feel bad because some states just started experimenting with this new, different and cheaper alternative to conventional auto insurance. We all know the traditional auto insurance model, which involves prepayment of insurance premiums for a specified amount of time.
The legislature in California has approved this new pay-as-you-go car insurance, which is partly based on the actual mileage put on a car instead of a monthly flat fee. While California is not the first state to implement this program, they are the first to do it statewide. One of the main issues though, is that drivers will need to prove the actual mileage being put on the vehicles.
The “Verified Miles Plan” as it is called, will allow drivers who only operate their vehicles short distances to have a cheaper alternative to the standard car insurance available today. This bodes well for senior citizens that only go to the store and run errands rather than taking long trips across the state on a regular basis. The actual monitoring of the mileage will be done by either a third party or an installed GPS device.
This will not only keep the short distance drivers’ rates much lower but will assist in keep the environment clean as well. The plan will allow for purchasing mileage in blocks or groups of a certain amount. This lets a driver choose the coverage for their exact needs, such as 10,000 miles, and that may last them as long as a year in some cases.
The Environment Defense Fund predicts that 50 million tons of greenhouse gasses will be eliminated by the year 2020 if this is put in to effect even partially. The pay-as-you-go plan will be optional and regular insurances will still be made available. There are some issues with this plan that have raised concerns with some groups.
For example, what happens if the GPS tracking device is chosen for mileage determination? Can the insurance company then use this information against them? The insurance agents may want to use all information gathered to determine what type of driver you really are? The speed, time of day and area are common pieces of data that can be garnered from the GPS tracking device.
Insurance companies are currently writing up the details of this type of policy for submittal to their respective states. Once these are approved, this type of policy should spread relatively quickly in its availability. Along with California, Cleveland, OH and Winston Salem, NC are utilizing this type of insurance now.
Although some critics find the tracking of your driving habits an invasion of privacy, many drivers who actually drive low mileage, will gladly give up the information to insure lower car insurance rates. Is this option for you? After compiling all the information, ask yourself if this option is right for you and your driving habits?
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