Can you pay for car insurance as you go?

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Yes! Pay as you go service is new but is growing in popularity. Only a few of the major auto insurers currently offer pay as you go pricing. These include, Allstate, State Farm, and GMAC. Progressive, with their Snap Shot program, is one of the first companies to begin to offer pay-as-you-go services nationwide.

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With pay as you go pricing, consumers essentially only pay for the time they are behind the wheel actually driving their automobiles. Using this pricing method, consumers can save up to 30% on annual car insurance premiums versus traditional policies which allow for unlimited road miles during any given policy period.

Conventional Payment Systems

For old timers, pay as you go means making payments, or paying for your insurance policy over a period of months rather than as a lump sum at the very beginning of the policy period. This practice has been especially important in recent years, as the economic recession has taken its toll on the average American wage earner.

Most families find it difficult, if not impossible, to come up with hundreds or even thousands of dollars at one time to cover their car insurance bill.

Car insurance providers are generally allowed to accept a deposit or partial payment for what is called binder coverage when an auto policy is initiated. Once a binder is in place, the insurance carrier is permitted to issue the required proof of insurance, the card or certificate each U.S. state is likely to require motorists to carry in their vehicle.

Most auto insurance companies allow for quarterly or monthly payments for annual renewals. However, don’t be surprised if your insurance provider tacks on a service charge to each partial payment. Some companies even raise the price of the semi-annual or annual auto premiums. Other companies eliminate eligibility for certain discounts if full premiums aren’t paid in advance.

Many Can’t Afford to Maintain Coverage

Due to difficult economic times, many Americans have been forced to reduce their car insurance coverage. Others have allowed their policies to lapse but continue to drive anyway, showing little regard for other motorists who must bear the brunt accident costs with uninsured or under insured motorists.

Consumer Reports, says that while these drivers may save a few dollars, they are taking considerable financial risks and putting others in harm’s way as well. With many out of work and benefits failing to cover necessary expenses, one of the first expenses cut is often car insurance premiums.

Studies found that drivers of older vehicles, especially those with cars that were 10 years old or older, were more likely to reduce their coverage and even cancel collision and comprehensive insurance, if not the entire policy. Consumer Reports found that motorists without this coverage increased between 53 and 63%. Cutting corners in this manner saved the average driver close to $230 per year.

Car insurance remains a major expense for most families.

In the five-year period, 2005 to 2009, insurance premiums for new vehicles averaged $913 per year. Those with older vehicles only paid an average of $528, still a sizeable chunk of money to have to come up with when you’re out of work and can’t manage the necessities.

Cutting car insurance coverage is a tough way to save money, and hardly effective if the family involved suffers even one minor auto mishap during the course of a year. Even more important is the fact that reducing or even dropping insurance coverage puts a family at serious risk and leaves them with little protection should a major accident occur.

Pay As You Go

One significant step in the battle to make car insurance more affordable is pay as you go pricing. Depending on how much and how many miles you drive, you may be able to enjoy big savings on a standard car insurance policy. According to MSN Money, pay as you go pricing is currently being introduced in a number of states by several of the nation’s largest auto insurers.

When first suggested a number of years ago, pay as you go wasn’t a particularly popular insurance option. Americans have long become used to unlimited coverage. Drive as often, as far and as many miles as you like for a single price. Most drivers shied away from the notion that their insurance provider would monitor their comings and goings and actually begin to measure the exact number of miles they were driving each year.

Economic realities being what they are, motorists are little by little warming to the idea of driving less. Part of this change is a direct result of $4 per gallon gasoline and higher all-around driving costs. As Americans in the 21st century, we not only have less discretionary income, but less time for recreation and vacations.

American motorists are reaching the conclusion that pay as you go auto policies aren’t such a bad idea.

Pay as you go policies tie your premium rates directly to the number of miles driven each year. In this system, drivers still receive discounts for safe driving habits that decrease accidents and moving violations. Drivers are also rewarded for driving less late at night and during peak rush hours and drive times. As mentioned earlier, savings on these plans can be as much as 30% versus conventional auto premiums.

Results of an informal online poll conducted by MSN suggested that a majority of drivers would consider driving fewer miles if they could save money on their car insurance premiums. 24% of respondents said they would definitely drive less, with 35% responding that they would at least consider driving less depending on how much they might save.

21% of respondents said they wouldn’t drive less and an additional 20% of respondents indicated that they would be unable to cut back on their driving. This poll drew 8,700 voluntary respondents over a period of several days.

Insurers Ready to Meet Consumer Needs

State Farm, the largest auto insurance company in the United States, is in the process of introducing its telematics based In-Drive program throughout the Midwest. Illinois was the first stop for the new program. Allstate, number three in the nation, also introduced its Drive Wise pay as you go program in Illinois this past year and has expanded to Ohio and Arizona.

Simply put, the time is right, say insurance industry experts. People are looking to save money on car insurance any way they can and many people have already committed to driving fewer miles to save money.

More and more, drivers are looking to pay as you go programs as reasonable alternatives.

Pay as you go programs not only measure how many miles you drive, but when during the day you drive. Driving habits are also measured in some systems; that is how often and how hard you apply the brakes in your vehicle and how smoothly you negotiate turns. Not only will motorists drive less, but also knowing they are being watched will help them become better and safer drivers

By exercising more control over how you drive, and how many miles you put on your vehicle each year, insurance companies are helping motorists to significantly reduce their risk for accidents. Lower risk means fewer claims, which allows companies to drop their auto premium rates.

Pay As You Go Programs

Reports from the ABC News Los Angeles affiliate last year introduced pay as you go pricing to Californians. Both State Farm and the Auto Club of Southern California introduced their programs in 2011.

State Farm’s Drive Safe and Save program will initially offer a 5% discount to Californians who agree to report their mileage or engage an OnStar monitoring system. Similar discounts can be earned by Auto Club policyholders who agree to install a monitoring device on their cars or self report their mileage.

Annual mileage limits for participation in these programs was initially set at 19,000 per year, not very many for a state that boasts the most miles of freeways in the country as well as the largest number of registered vehicles on the road. California is also the third largest state in the United States by area!

The Progressive Insurance website boasts that Progressive customers have already collectively saved more than $70 million with the Progressive Snap Shot program. Progressive claims that more than 900,000 customers have plugged the Snap Shot device into their cars’ computer systems to monitor the number of miles they are driving.

Not for Everyone

While many drivers would subscribe to pay as you go plans, this type of monitored driving is not for everyone. Many drivers, perhaps the majority, would likely prefer to continue with traditional all-you-can-drive pricing programs.

Experts predict however that the pay as you go trend will continue to grow.

Pay as you go car insurance programs offer consumers several benefits. Not only do participants save money but these programs are environmentally friendly as well, encouraging motorists to save gas as well as wear and tear on their vehicles.

While pay as you go may not be for everyone, many can benefit immediately by reducing their costs.

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