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Post Time- 10:14 AM Post By - admin

Pay as You Go Insurance – Is it Right for You?

Most of us are always looking for ways to economize on life’s necessities; automobile insurance being one of them. In recent years, usage-based car insurance, also known as pay as you go (PAYG) insurance has increased in popularity. For drivers with the right circumstances, savings could be anywhere from 25% to 50% less than traditional insurance. It sounds great but is it right for you? Keep reading to find out.

How it Works

Depending on the provider, this coverage may also be known as pay-per-mile, pay-as-you-drive, mile-based car, low mileage discount, or usage-based auto insurance. Basically, your policy premium is based on how much you use your vehicle.

Traditional insurance makes the following assumptions:

  • Most people drive an average of 12,000 miles per year.
  • Most people drive during peak traffic hours (morning and evening rush hours).
  • Most accidents happen during peak traffic hours.

If these assumptions are not true about your driving habits, PAYG may be an attractive option.

How Does the Company Know When I’m Driving?

There are three common ways that insurance companies can monitor or verify your driving behavior.

  1. Certify your odometer reading on an annual basis.
  2. Install a tracking device.
  3. Use a built-in system such as OnStar®


If your driving behavior qualifies, your premium can be significantly lower than it is with traditional auto insurance. This is particularly true for young or inexperienced drivers and can be a way to lower a high premium. Drivers who find this an option may:

  • Have a short commute
  • Carpool
  • Work from home
  • Don’t drive often or have low annual mileage
  • Use public transportation and driver their cars on the weekend only
  • Have a multiple vehicle household with lesser used vehicles
  • Have rarely driven antique cars


Privacy: Mandatory tracking devices can make people feel like “Big Brother” is watching over your shoulder. In some cases, these tracking devices come at an additional purchase cost or periodic service fee.

Maximum Mileage Limit: PAYG coverage generally comes with a maximum mileage limit. If you exceed the limit in the specified time, you may incur a penalty fee or a surcharge for every mile over the limit. This may mean that the coverage costs more than traditional insurance.

Changing Premiums: For policies wholly dependent on a per mile charge, this could mean a different premium per period which can make it difficult to budget.

How to Decide

  • Track your mileage for a month. Be sure to select a month that reflects your typical driving patterns and behavior.
  • Multiply that typical month’s mileage by 12 to annualize the number. For instance, if you drive 650 miles in June, and June is a typical month for you, then you can estimate that you drive 7,800 miles annually.
  • Multiply the number of annual miles by four cents; the approximate cost companies charge per mile. 7,800 x .04 = $312
  • The insurance company will likely charge a base rate for the provided coverage. This number can vary from company to company. A typical, average amount is $360 per year.
  • Add the base rate and the mileage rate to get the total cost for your annual coverage. $312 + $360 = $672.00 ($56 monthly)
  • Compare the number to the premium amount you currently pay. If it is less, then PAYG auto insurance may be the right option for you.

The pros at Shepard’s Automotive Center value customer relationships and we seek to be your one-stop-shop for mechanical and collision repair. We invite you to contact us online or call 978-465-5973, Monday through Friday between 8am and 5pm. Regardless of your repair, we will be happy to work with you to map out a plan that fits your budget and solves your problems.

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