Pay as you go car insurance

Pay-as-you-go car insurance (PAYG) is a specialised type of policy that’s designed so that you only pay for cover when you’re using your car. Find out how it works and compare your PAYG insurance options.

How does pay-as-you-go car insurance work?

Once you’ve taken out a PAYG insurance policy, you’ll be covered for any driving you do during the insurance period. You pay a basic set rate each month or year, and then pay a small additional charge for each mile or hour you drive in the insurance period.

Like telematics insurance, pay-as-you-go insurance will generally require you to attach a black box to your vehicle, which tracks how much you drive. However, with PAYG insurance, the black box does not necessarily measure your driving performance but instead records the distance and time you spend driving.

If you’re involved in an accident, or need to claim on your insurance, you’ll need to pay a regular excess amount as you would with a standard insurance policy.

Who is pay-as-you-go insurance best for?

Pay-as-you-go insurance is best suited to those who don’t drive regularly but want ongoing cover for when they do need to drive. As you’re charged based on the time or distance you drive, you won’t be paying for cover you don’t use, but will avoid the hassle of applying for temporary insurance every time you want to drive.

Pay-as-you-go car insurance for young drivers

PAYG insurance may be suited to young drivers, especially those at university or who only drive occasionally. You’ll be covered for when you need to drive, such as when you’re borrowing a friend’s car or returning home.

As this type of policy requires a black box, you may also be able to combine it with a telematics insurance policy. Car insurance is generally more expensive for young drivers, but telematics cover can help reduce the cost of your insurance, provided you’re a good driver.

Pay-as-you-go car insurance for learner drivers

As a learner driver, you may be limited in when, and how much, you drive. While you’ll need car insurance in order to legally drive in the UK, it may not make financial sense to get regular car insurance if you’ll only be driving a handful of times each month.

PAYG insurance gives you ongoing cover but also means you won’t be paying for more extensive cover designed for frequent drivers.

Pay-as-you-go car insurance for delivery drivers

PAYG cover may be worth considering if you’re a part-time delivery driver, or only deliver in your local area. If you drive every day or are responsible for long-haul deliveries, then regular insurance or telematics insurance will likely be more cost effective.

Types of pay-as-you-go car insurance

• Pay-per-mile PAYG insurance

As the name suggests, you’ll pay for insurance based on the number of miles you drive each insurance period. The black box attached to your car will track the distance you drive, and you then pay based on the total miles.

• Pay-per-hour PAYG insurance

This type of policy is calculated based on the amount of time you use your vehicle. The less time you spend driving, the less you’ll pay for insurance.

• Pay how you drive

Also known as telematics or black box insurance, this type of cover measures how well you drive, with discounted premiums given to those considered to be safer drivers. This is based on a number of factors including your speed, acceleration, braking, as well as the time of day and location you generally drive in.

• Black box tracker

Also called telematics insurance, black box insurance involves a tracker being attached to your car to measure your driving performance. Along with measuring time and distance travelled, the black box also tracks things like your braking, accelerating and turning to determine how well you drive.

You’ll then receive cheaper insurance if you can demonstrate that you’re a safe driver. This may be especially suited to younger or inexperienced drivers, who often face higher insurance premiums.

• Temporary car insurance

If you only drive on certain occasions, such as when hiring or borrowing a car, you can get temporary car insurance to cover you only for the period you drive. This can be anywhere from 1 hour, or up to 28 days.

This may be a better option for those who don’t own a car, as you won’t need to pay an ongoing fee.

Black box insurance exclusions

There are a number of regular exclusions that apply to black box and PAYG car insurance. These include:

• Improper use of the vehicle
• Use by an unlicensed or uninsured driver

How can pay-as-you-go car insurance save you money?

With regular car insurance, you pay a flat premium regardless of how often you actually drive. If you only use your car occasionally or only drive short distances, you may be paying more than you need to for insurance.

Pay-as-you-go insurance only charges you for the time or distance you drive, and this can often result in cheaper premiums, depending on how much you drive.

If you drive every day or often drive long distances, normal car insurance will likely be a cheaper option.

Frequently asked questions

• How does a telematics device rate my driving?

  The black box tracker that is attached to your car measures a number of factors to determine how safe your driving is. This includes how you brake, accelerate and turn, as well as the areas and the time of day you generally drive.

• What does the insurance company do with telematics data?

  Your insurance provider uses your data to calculate how “safe” your driving performance is. The safer you drive, the less at risk you are of having an accident or needing to make a claim on your insurance. As a result, your insurer will then offer you cheaper insurance premiums.

• How much can I save on pay-as-you-go insurance?

  This depends on things like your age, location and driving record, as well as the type of PAYG insurance you get. Experts have found that drivers who only use their car occasionally could save approximately £200 on insurance by switching to a pay-as-you-go policy.

• Do I need to pay for the black box tracker?

  The black box will generally be provided by your insurer. You will not need to buy your own.

• Who offers PAYG car insurance?

  Many popular providers now offer telematics or black box insurance, as well as pay-as-you-go insurance. Make sure to compare a range of insurers to find the PAYG policy that best suits you.

• Can I get pay-as-you-go insurance for other vehicles?

  PAYG insurance is currently only offered for cars, and may not be available for vans, motorbikes, buses or trucks.