Pay-as-you-go car insurance (PAYG) is a specialised type of policy that’s designed so you only pay for cover when you’re using your car. Find out how it works and compare your PAYG insurance options.<\/p>
Pay-as-you-go car insurance policies charge you according to how much you drive or the way you drive, rather than charging a flat annual premium, as a traditional car insurance policy<\/a> would. Your insurer will usually use a telematics device to record this data and your premiums will be adjusted accordingly.<\/p> 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.<\/p> Like telematics insurance, pay-as-you-go insurance will generally require you to attach a black box<\/a> 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.<\/p> 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.<\/p> As the name suggests, you’ll pay for insurance based on the number of miles you drive each insurance period. Unlike standard car insurance, where you’ll be asked to estimate how many miles you drive per year, pay-per-mile insurance will ensure you are more accurately charged for the amount you drive.<\/p> You’ll have to pay a flat fee to cover the car while it’s stationary and the remainder of your premiums will be based on the distance you drive. A black box will be attached to your car to track this, but it won’t monitor your driving habits.<\/p> Pay-per-mile insurance can be a cheaper option if you’re a low mileage driver as you simply pay for the distance you travel.<\/p> This type of policy works in a similar way to pay-per-mile insurance, but rather than tracking your mileage, your premiums will be based on the amount of time you use your vehicle. The less time you spend driving, the less you’ll pay for insurance.<\/p> Again, you will pay a flat fee to cover your car while you’re not using it, and the remaining portion of your premiums will be based on how frequently you drive. Your insurer will track this data using a black box or plug-and-drive device, and you can usually follow this on an app.<\/p> 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. Your driving performance is based on a number of factors including your speed, acceleration, braking, and cornering, as well as the time of day and location you generally drive in.<\/p> To track your driving habits, you may be able to choose from a black box, a removable plug-and-drive device, or an app that uses the GPS in your smartphone.<\/p> Your insurer will use this data to give you a driving score and this will determine how much you pay for your car insurance. If you can demonstrate you are a safer driver, your insurance premiums are likely to be lower. You can usually track your performance via your insurer’s online portal or your smartphone app and you may even be given tips on how to improve your driving.<\/p> For these reasons, pay how you drive insurance can be particularly suited to younger or inexperienced drivers, who often face higher insurance premiums.<\/p> If you only drive on certain occasions, such as when hiring or borrowing a car, temporary car insurance will provide cover just for the period you drive. This can be anywhere from 1 hour, or up to 28 days.<\/p> You can often get insured in just a matter of minutes which can be ideal if you need to borrow someone’s car at short notice.<\/p> With regular car insurance<\/a>, 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 car insurance.<\/p> In comparison, pay-as-you-go car insurance only charges you for the time or distance you drive. This means that if you don’t drive large distances or very often, you could save money with a pay-as-you-go policy. To be sure, it’s always best to run quotes for both options to see which works out to be the better value.<\/p> If you drive every day or often drive long distances, normal car insurance will likely be a cheaper option.<\/p> Unlike PAYG insurance, short term car insurance<\/a> won’t require you to have a telematic device fitted to your car. It also won’t track the number of miles you drive or how often you use your car.<\/p> Instead, short term car insurance provides cover for a short period of time, whether that’s one hour or one month. Although cover is restricted to that period, how much you use the car within that time won’t affect the amount you pay. Once that period of time is up, your cover simply expires.<\/p> Both types of policies have different uses as a result. You might choose PAYG insurance if you are a low mileage driver, for example, but pick short term cover if you’re borrowing a friend’s car for a few days.<\/p> Similar to standard car insurance, with PAYG insurance, you can usually choose from three levels of cover:<\/p> As with any type of insurance policy, there will be a range of exclusions to look out for in the small print. For example, you may not be covered for the following:<\/p> The amount you pay for PAYG car insurance will depend on the number of miles or hours you drive, as well as factors such as:<\/p> Younger, less experienced drivers tend to pay more for their premiums than older drivers. For example, a 25-year-old driving 2,000 miles a year could pay \u00a3492 a year, while a 50-year-old covering the same mileage could pay \u00a3336 a year. (By Miles quote figures.)<\/p> Depending on the insurer, you may be able to bolt on the following extras to your policy:<\/p> This will depend on how often you use your car. If you don’t cover a high number of miles or you only use your car from time to time, a PAYG car insurance policy could be cheaper than standard car insurance. However, if you drive regularly or have a high annual mileage, you may find standard car insurance works out to be better value.<\/p> PAYG insurance may be suited to young drivers<\/a>, 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. However, bear in mind that some PAYG insurers will not cover those under the age of 25<\/a>.<\/p> Alternatively, you could also look at temporary car insurance.<\/p> 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.<\/p> PAYG insurance gives you ongoing cover but also means you won’t be paying for more extensive cover designed for frequent drivers.<\/p> PAYG cover may be worth considering if you’re a part-time delivery driver, or only deliver in your local area. However, you should check the policy documents carefully as some insurers may exclude driving for commercial reasons.<\/p> If you drive every day or are responsible for long-haul deliveries, then regular insurance or telematics insurance will likely be more cost effective.<\/p> If you’re a young driver or you don’t drive many miles per year, PAYG car insurance can be a great way to save money. However, a reduction in car insurance premiums isn’t guaranteed. So if you’re considering taking out a policy, make sure you compare the cost against a standard car insurance policy to check it’s the most cost-effective option.<\/p>How does pay-as-you-go car insurance work?<\/h3>
Types of pay as you go car insurance<\/h3>
Pay-per-mile PAYG insurance<\/h4>
Pay-per-hour PAYG insurance<\/h4>
Pay how you drive<\/h4>
Temporary car insurance<\/h4>
Can pay-as-you-go car insurance save you money?<\/h3>
Is short term car insurance the same as PAYG?<\/h3>
What does pay-as-you-go car insurance cover?<\/h3>
What does pay-as-you-go insurance not cover?<\/h3>
How much does pay-as-you-go car insurance cost?<\/h3>
What extras can you get with pay-as-you-go car insurance?<\/h3>
Is pay-as-you-go car insurance cheaper?<\/h3>
Is PAYG insurance suitable for younger drivers?<\/h3>
Is PAYG insurance suitable for learner drivers?<\/h3>
Is PAYG insurance suitable for delivery drivers?<\/h3>
Pros and cons<\/h3>
Pros<\/h4>
Cons<\/h4>
Bottom line<\/h3>
Frequently asked questions<\/h3>
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