Pick and Pay Your Insurance Premiums Depending on How Much you Drive
What is pay-as-you-drive insurance (PAYD)? I think of pay-as-you-drive insurance as a tax incentive. The more you spend, the more tax you pay. When it comes to pay-as-you-drive insurance, the more you drive, the more you pay, and vice versa. The difference between tax and insurance premiums is the incentive behind its inception. Pay-as-you-drive was designed to bring down car insurance premiums for those who drive less and consequently cause fewer accidents by being on the road less. The idea was also fueled by concerns at the rising cost of fuel and the environmental impact of cars.
Personally, I wish that more people would take out pay-as-you-drive insurance because the traffic on the way to work in the morning drives me mad. (Taxis and business vehicles, by the way, are not covered.)
This is not a concept devised by rocket scientists. It started out quite simply conceptually, but it has evolved and subsequently spawned a vigorous debate on internet forums, and in pubs and insurance boardrooms. It actually left the chat rooms for organic versus non-organic vegetables virtually, if you’ll excuse the pun, empty for days.
Basically, the argument is that those people who drive less are penalised by those who drive more and are consequently (statistically) likely to have more accidents (men will be jumping up and down here now to discover the reason women are charged lower premiums – apparently they drive less).
I don’t personally like pay-as-you-drive insurance (because I’d have to pay more) but I think it is a wonderful option for those for whom it works; and it does work for many drivers, e.g., a mother taking the little ones to Bishops on school days in the Hummer. Any saving is welcome and anyway she only drives six blocks a day plus the weekly book club. The chances of an accident, we all must admit, are really low. This particular insured, to my mind, would benefit from pay-as-you-drive and so would the insurance company. She pays a low premium (win) and the insurer is unlikely to ever have to pay out (win). On the other hand she is covered if she does have an accident and the H3 is relatively inexpensive – it makes the neighbour’s Audi Q7 look like Mighty Mouse for a third of the price.
I drive a middle of the road vehicle that has unfortunately seen better days. I can’t afford to upgrade. I drive 100kms every day to work and back. Statistically, every mile or kilometer I drive increases my chances of an accident. With pay-as-you-drive insurance, my premiums are going to border on ridiculous (lose). My insurer is covering his risk but the chances of him having to pay out are high (lose).
You do the math.
Insurance companies usually try to reward safer drivers, or rather, drivers who make fewer claims; hence the ‘no claims bonus’ concept. Pay-as-you-drive insurance is a more active concept; your car insurance premiums can vary to the same extent your fuel consumption may vary when you adopt fuel-efficient driving techniques. For example, you might start taking the bicycle down to the beach instead of the Ferrari.
Your premiums are calculated either based on the odometer reading of your car or by using a black-box type of device which is linked to a satellite data recorder. Before you buy Pay-As-You-Drive Insurance you should get various quotes from companies who offer this type of policy. Get more information about getting cheap insurance quotes in South Africa and make the most of your car insurance.
