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, in order to use Pay As You Drive, you must consent to have your mileage monitored. Monitoring your mileage is not cost-free, and those costs are paid by the insured, not the insurance company. Especially for GPS monitoring, those costs can outweigh any savings gained by using Pay As You Drive. In addition, drivers have to get a new monitoring device any time they change insurance companies. That reality can make you think twice about changing companies just to get a lower rate.
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.
Additionally, insurance companies would have to develop an entirely new payment structure in order to offer Pay As You Drive insurance to their customers. The insurance companies could then easily pass any costs associated with this new payment structure directly onto drivers, again removing any financial benefit gained from Pay As You Drive insurance.
Concerns have also been raised about the data gathered by the odometer tracking devices. Supporters of Pay As You Drive insurance claim the devices will only monitor the mileage necessary to compute the Pay As You Drive insurance premiums, but that could easily change. The devices could be revamped to gather additional data on drivers, including whether they drive, when and how often. This data could be then be passed along to the insurance providers, who could possibly use this information to justify rate increases for Pay As You Drive insurance premiums.
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.
At first glance, the promises of lower premiums for Pay As You Drive seem very attractive. If you are considering a Pay As You Drive policy, however, be sure to ask detailed questions of your authorized insurance agent to make sure Pay As You Drive 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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