Could you save money with Pay as you go car insurance?
As a young driver, you're statistically more likely to be involved in an accident - which is why newly-qualified drivers tend to be faced with sky-high car insurance premiums.
Technology has offered up a solution to help bring costs down for teenage drivers, in the form of pay as you go car insurance, otherwise known as black box insurance or telematics insurance.
Using telematics technology, these pay as you go car insurance policies work by measuring exactly how many miles are driven and charge the driver accordingly.
Pay as you go car insurance is one of the options young drivers have for lowering their premiums, but it may not be suitable for everyone. Here's a look at how it works...
How does pay as you go car insurance work?
With a pay as you go car insurance policy, you only pay for the miles you actually drive. The more miles you cover, the higher your premiums should be.
The insurer will install a telematics tracking device in your car, which is a small black box about the size of a smartphone. The tracker records information about your driving, including miles covered, and relays it to the insurer.
Many pay as you go car insurance companies give you online access to this data too, allowing you to see for yourself how you're driving.
The assumption is that the fewer miles you drive, the less time there is for you to be involved in an accident and making a claim - resulting in cheaper car insurance.
Each black box insurance firm will charge a different amount per mile and some companies offer different rates of driving at off-peak times where again, the assumption is that you're less likely to be involved in an accident.
Advantages of pay as you go car insurance
Ordinarily, car insurance providers use information about you, such as your age, address and years' worth of driving experience, and your car, such as its performance and value to evaluate your risk profile and work out how much your insurance will cost.
Less experienced drivers and cars with high performance or high value tend to attract the highest premiums because there's a greater chance the insurance company will have to pay out for a claim.
Rather than basing your premiums on assumptions and average statistics on how young motorists drive, these black box insurance policies are tailored more towards you as an individual and can therefore make your insurance cheaper.
What's more, pay as you go car insurance affords the driver more control over their premiums because it's based on mileage. If the driver is concerned about the rising cost of cover, they can reign in the number of miles they drive, or plan journeys around off-peak driving hours.
Off-peak times are defined by each individual insurance provider, but they're typically at night and the early hours of the morning. This could be ideal if you work irregular hours and need to drive to and from work.
If you're not likely to be driving very far or most of your driving takes place during off-peak hours, black box insurance can be a viable way to keep car insurance costs down, but it's not necessarily suitable for all young drivers.
Disadvantages of pay as you go car insurance
First off, some black box insurers charge a fee for the telematics device itself and for installation, though this won't be anywhere near the price you'd pay for a traditional car insurance policy.
The obvious drawback is that you cover a lot of miles and can't afford to cut back on your driving; the policy could end up costing you as much, if not more than a traditional policy.
This could be largely out of your control, for example if you took on a new job or moved home and ended up with a longer commute, your insurance costs could shoot up accordingly.
There's also no distinction between types of roads. You might drive 50 miles a week on relatively quiet, safe roads but you'd pay the same as a driver who was driving 50 miles a week on a motorway.
Other ways to get cheaper car insurance quotes
If you think pay as you go car insurance is unsuitable for you, there are other things you can do to make traditional car insurance more affordable.
As a young or newly-qualified driver, one popular way of lowering the cost of car insurance is to take the Pass Plus advanced driving course.
This six-module course is taken after you pass your standard driving test and teaches things like night-time driving and driving in inclement weather, which isn't part of the standard test. The majority of insurers will offer a discount to drivers who have passed the course.
Another common method is to add an older, more experienced driver to the policy as a named driver. The theory is that if there is another driver insured on the car, you'll be spending less time behind the wheel so there's a reduced risk of you being in an accident and making a claim.
You must only add them as a named driver though. It may be tempting to add them as the main driver and yourself as the named driver to get a cheap quote, but this is known as fronting and is illegal.
Make sure you compare quotes using MoneySupermarket's free comparison tool to see if a traditional or pay as you go car insurance policy is best for you.
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