Pay-as-you-go vs temporary car insurance

Need car insurance for a rarely driven or borrowed car, but not sure which cover to take out? We've got the answers, plus pros and cons for each option.

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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.
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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.

Temporary car insurance vs pay-as-you-go car insurance

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

  • Can be used as a replacement for an annual policy
  • Offers flexible cover
  • Can save you money

Cons

  • Usually requires installing a tracking device in your car
  • Not available for every area of the UK

Pros and cons for temporary car insurance

Pros

  • Allows you to borrow a car from a friend or family member
  • Flexible cover that can save you money
  • Available from as little as one hour

Cons

  • Cannot be used instead of an annual policy – the car must already have permanent cover in place
  • For hourly rating, getting stuck in traffic can cost you

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.

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