Pay-as-you-go vs temporary car insurance

Car insurance can be a confusing subject, even without the addition of alternative cover policies to the table. However, if you need insurance for a limited time or for a car you don’t drive very often, it’s good to know you have options.

We’ve reviewed the differences between pay-as-you-go and temporary car insurance, to help you decide which one would work best for your circumstances.

What is pay-as-you-go car insurance?

Pay-as-you go insurance means you only pay for the miles you drive. So, if you only use your car for the occasional trip to the supermarket or the countryside at the weekend, you won’t be throwing money away while it’s sitting in your driveway or garage.

What are the different types of pay-as-you-go car insurance?

Also known as PAYG or usage-based car insurance, there are three main ways in which this type of cover is measured:

• By tracking your miles. Some providers, like By Miles, calculate your premium by installing a small device in your car. This is similar to a black box device, but it only tracks how many miles you drive, not the quality of your driving.
• By hourly rate. This cover is different from temporary car insurance in that you can insure your own car with it without having to declare it as SORN, and just pay for the hours you spend on the road. The premiums are calculated in a similar way to the option above, but the device installed in your car measures how much time you spend driving, rather than how many miles you do. One issue could be having to pay extra for getting stuck in traffic, but topping up your hours can normally be done easily through an app.
• By estimating miles. With this type of cover, you’re asked to estimate how many miles you are likely to drive at the beginning of each month, and your premium is calculated accordingly. If you know exactly how much you drive each month and don’t want a tracking device placed in your car, this can work for you. However, if you overestimate the miles you drive, you might waste money, as there’s usually no refund offered for unused miles. If you have to drive more than what you estimated, you might be charged extra.

Quality car insurance, by the mile

• Pay only for what you use without compromising cover
• No claims bonus protection comes as standard
• Instantly see what you will pay through the app

Go to site

What is temporary car insurance?

Temporary car insurance usually provides instant cover from one hour to 30 days. It’s usually offered as a comprehensive policy, though cover levels vary by insurer.

Temporary car insurance designed for learner drivers is also available.

What’s the difference between pay-as-you-go and temporary car insurance?

The most important difference between these two types of policy is that temporary cover cannot be used as the sole car insurance policy for a car.

This means that it can only be used if you are borrowing a car from someone who already has an annual policy covering their vehicle. The reason for this is that it’s illegal to own an uninsured car without declaring it as SORN, even if it’s kept on your driveway or in your garage.

Temporary car insurance is also often used for rental cars, but this is normally arranged by the hire company.

Circumstances where you might want pay-as-you-go car insurance

• You need cover for a car you own but think you’ll drive less than 7,000 miles per year.
• You own multiple cars and only use one or more for a limited number of miles (like for the school run and supermarket trips, for example).
• You want or need to be able to control your insurance costs from month to month.
• You want the flexibility of driving your car only occasionally, without declaring it as SORN.

Circumstances where you might want temporary car insurance

• You’ve just bought a new car and want to drive it home from the point of purchase.
• You’re borrowing a car for a short period of time from a friend or family member.
• You’re going on a long journey in someone else’s car and want to share the driving.
• You need to test drive a car you might buy.

Pros and cons for pay as you go

Pros and cons for temporary car insurance

Bottom line

If you need cover for a car you rarely drive or that you’re borrowing from someone else, having the option to take out either of these policies can save you a lot of money and hassle.

For a car you own but don’t drive very often, pay-as-you-go insurance is the best option. If you’ll only be using the car for a limited amount of time, you need temporary cover.

The main difference is that temporary cover cannot be used as the sole policy for the car, so make sure it already has annual cover in place.

Frequently asked questions

• Can I save money with pay-as-you-go cover?

  This depends on your circumstances, but if you only drive your car occasionally, then the answer is probably yes.

  For people who don’t use their vehicle very often, annual insurance can be wasteful. PAYG insurance allows you to only pay for the time, or miles, you use behind the wheel.

• Is PAYG car insurance suitable for fast food delivery?

  It can be, but not every provider offers cover for business use, so make sure you check the policy exclusions.

  There are some providers, likes Zego, who offer temporary and PAYG cover aimed specifically for delivery drivers.

• Can 17-year-olds get temporary car insurance?

  Some providers offer temporary cover for younger drivers. However, like with all types of car insurance, it’s likely to cost more than for older drivers.

  You can find out more in our guide to temporary insurance for young drivers.

Finder survey: What proportion of Brits would consider upgrading their car to have a new exhaust?