Pay as you Go
Car Insurance

Pay As You Go insurance, is it for me?

Pay As You Go car insurance, also known as “pay-per-mile” or “pay-per-use” insurance, is an increasingly popular option in the UK for drivers looking for flexibility in how they pay for coverage. Instead of committing to an annual premium upfront, this type of insurance allows you to pay based on how often, and sometimes how well, you drive. This guide explores the key features, options, and considerations to help you decide if Pay As You Go insurance is right for you.

What Is Pay As You Go Car Insurance?

Pay As You Go insurance provides coverage based on your actual usage of the car, typically charging you for the miles you drive or the time the vehicle is in use. This makes it a flexible alternative to traditional car insurance, which requires an upfront or monthly payment for a full year’s worth of coverage, regardless of how much you drive.

There are two main types of Pay As You Go insurance:

• Pay-per-mile: This policy charges you a base fee for when your car is parked, along with a per-mile rate when you drive. It’s ideal for drivers who don’t cover many miles annually.
• Pay-per-hour or day: Some insurers offer short-term insurance by the hour or day. This is great for occasional drivers who only need insurance for specific trips or short-term use of the vehicle.

Benefits of Pay As You Go Insurance

• Cost-effective for low-mileage drivers: If you only use your car occasionally or drive short distances, Pay As You Go insurance can be more affordable than a traditional policy.
• Flexibility: You only pay for what you use, making it ideal for people who don’t want to commit to a full-year policy or who have unpredictable driving patterns.
• No long-term commitment: This type of insurance is perfect for short-term or temporary needs, such as borrowing a car or using a second vehicle occasionally.

Considerations and Potential Downsides

• Higher per-mile costs: Although you may pay less overall if you drive infrequently, Pay As You Go insurance often has higher per-mile rates compared to the average cost of a traditional policy. If your driving increases unexpectedly, this could lead to higher costs than anticipated.
• Base fees: Many policies still charge a base rate to cover your car when it’s parked, which may reduce savings for very occasional drivers.
• Tracking required: Pay As You Go insurance often uses telematics (black box technology) or a mobile app to monitor your mileage or driving behaviour, which some drivers may find intrusive.

Is Pay As You Go Right for You?

Pay As You Go insurance is best suited for drivers who:

• Drive less than 6,000 miles per year
• Use their car infrequently, such as retirees, students, or those who work from home
• Want short-term cover for borrowing or using a car occasionally

Great for Flexibility

Pay As You Go car insurance offers flexibility and can be a cost-effective solution for drivers who don’t use their vehicle often. However, it’s important to weigh the potential for higher overall costs, particularly if your driving habits change. Always compare policies to ensure you’re getting the best deal based on your specific driving needs.