Over the years, many auto insurance companies have looked for multiple ways to respond to changing consumer needs. As gas prices continue to soar through the roof, all across the country consumers are desperately looking for ways to save money when fueling their cars. High gas prices combined with paying auto insurance premiums can really put your finances in a crunch. Insurance companies have responded by creating a new insurance program known as a pay as you drive program that could provide policy holders some financial relief.
How Do Pay As You Drive Programs Work
The program is officially called Environmental Defense. The purpose of the program is to track an individual's car mileage. There are two proposed ways of accomplishing this: one method is done by installing a proprietary odometer that contains an embedded cell phone that periodically calls in your mileage to your insurance company.
The other method involves installing a GPS device into an phone in your car, like the OnStar system, to reveal your actual travel route. Which of these methods is best for you? Here's some more information to guide you in that decision.
Concerns About The GPS System
Some consumers object to the GPS system. They feel that it imposes on their right to privacy. But the GPS device has certain advantages over the propriety odometer method of tracking mileage. First, it not only tracks your miles, but it also details where and when you drive. For example, if you were stuck in congested traffic during the rush hour, the GPS device may cost you more than if you waited to travel during off peak hours. So you need to weigh your privacy concerns against the potential benefits.
The Benefits Of Drive As You Pay Programs
The Environmental Defense believes that a pay as you drive program would save consumers money in the long run, and help reduce pollution. Insurance companies will offer you a financial incentive for driving less. An added benefit of the pay as you drive program is that it could end up reducing driving and congestion by 10 percent to 12 percent. This could be a great help in cities where traffic problems with overcrowded highways are mounting. Some insurance companies are now offering pay as you drive programs to their policy holders as a trial.
Do Drive As You Pay Programs Save Policy Holders Money?
Pay as you drive programs could make auto insurance more affordable for drivers by giving them some control over their auto insurance premiums. The pay as you drive program could also decrease the number of insured drivers and reduce the financial burden of insurance premiums on low-income policy holders.
Who Does Pay As You Drive Benefit
Determining how cost effective a pay as you drive program can be is very simple. The program would charge part of your annual premium rate into a per mile fee. Your auto insurance company would assign your car to a group according to your zip code, vehicle type and usage. When a per mile rate is determined, you may be responsible for paying an upfront fee for your pre-determined mileage. The amount of time you spend driving is what determines whether you will receive a rebate or pay more. It is estimated that this type of program could end up saving some policy holders up to 25 percent on their auto insurance policy.
Take a look at the mileage you put on your car each year. If you're not traveling daily for business or school and don't tend to take long road trips then a pay as you drive auto insurance policy might beneficial. |
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