Pay as You Go Insurance - is it Right for You?

Deductibles, collision, liability. Getting car insurance can be confusing, not to mention expensive. And if you don't drive all that much, sometimes the expense doesn't seem worth it. For these individuals, pay as you go car insurance might just be the answer.

Car insurance companies calculate rates by determining how much they think you will drive in a year. This means you pay the same rate if you drive 50 miles a week or 500. For those who drive 500 miles a week, it's a pretty good deal. But for those who drive significantly less, it can seem like a rip off, and a lot of times, it is.

So what to do about it? Many car insurance companies are releasing pay as you go insurance. This is exactly what it sounds like. You only pay for what you use. Insurance companies install a device in your car that tracks how many miles you use per week, or month, depending on their policy. This allows them to accurately adjust your rate to exactly what you use when you use it.

This can have a lot of benefits, the most obvious being what can amount to a large savings. Who doesn't want to save a few dollars, especially now? But many proponents of pay as you go car insurance claim that it will also reduce the amount of miles individuals drive. If it's going to cost more, many people won't travel extra miles if they don't have to.

So is pay as you go car insurance for you? To decide, you should ask yourself a few questions. First, try tracking your own mileage for a week. If you are only making a trip or two to the store, then it's reasonable to consider this type of insurance. However, if you drive 45 miles to work every morning, then this type of insurance probably isn't for you.

There are a few other things to consider as well. First, there's the uncertainty of your bill. Sure, it may be low most months, but take a road trip or two, and your insurance will go up. Personally, I like the certainty of knowing what my bill will be when it arrives, but that's just me.

Second, many people claim it's an invasion of privacy. While devices aren't equipped with a GPS device, it can still be a little disconcerting to know that someone is tracking your mileage. For others, this may not be a problem.

Like everything, pay as you go insurance has its benefits and its problems. The ultimate decision about whether it's worth it is up to you.