Car insurance premiums take a huge toll on a person or family’s annual budget. One way to decrease the impact of car insurance on your budget is by availing of a Pay As You Drive (PAYD) insurance scheme. But how does Pay As You Drive car insurance work?

Traditional car insurance systems give you a fixed amount for the whole year, regardless of how much you take your car out. That is similar to allotting a lump sum for petrol every year, without considering car usage. Pay As You Drive car insurance works by only setting the amount of money you pay for your car insurance based on the amount of time you are actually on the road.  Pioneered in South Africa, this ingenious scheme allows you to lower your insurance costs while still giving you confidence that any mishap which may happen while you are driving is insured.

Car insurance works by allowing you to pay a certain amount per year or month used as a base to cover any damage which your car may incur within the period. These rates may be quite high since a lot of things can happen within the span of a year or even a month. Car accidents are a constant risk any car owner must take, and thus car insurance is a worthy investment. Repairs from inevitable wear and tear can also be a financial burden once it occurs unexpectedly, so getting a car insurance which allows you to enjoy your driving experience without worrying about shelling out large amounts of cash for unanticipated costs is a good idea.

But what if you don’t really drive that much? What if you only use your car to drive and shop every weekend? Why would you have to pay insurance for the times when your car is not out on the road and is instead safely ensconced within the confines of your home or garage? Why should anyone pay insurance rates for times when the car is not at risk of incurring any damage that needs to be repaired and paid for?

Pay as you drive car insurance considers these factors and adjusts your insurance rates based on the amount of time you are actually on the road and at risk of incurring damage to your car. It is a rare occurrence for a car, safely in a garage, to get hit by another car. It is almost impossible for an inert car to get damaged by a lamp post, a tree or a pedestrian.  The more time a car spends being driven on the road, the higher the probability that it will obtain damage or costs which would require insurance to step in.  So instead of overall time, one must only consider the time a car spends traversing the motorways. But how can anyone monitor how much time a person spends driving?

This is where mileage comes in. Mileage is the amount of distance (kilometers or miles) which a car covers. Since a car can only cover distance when the engine is running (usually; accidents involving sloping hills and cars have been known to happen), mileage is a good indicator of how much time a person spends driving the car. Data collection devices are installed in the car to monitor mileage, with some having options for emergency assistance and vahicle recovery as well.

Insurance companies in South Africa which offer Pay As You Drive insurance usually gives them in mileage packages based on the number of kilometers a person usually drives per month.  Instead of time, distance per unit time is the used measure for the validity and coverage of the insurance. Aided by the data collection device in your car, it provide more insurance value for your money, ensuring that you pay for insurance only when the risks that necessitate it are incurred. Some companies even allow you to carry over left over miles or kilometers from previous months, a safety net when you may go over the limits of your insurance plan.

Pay As You Drive car insurance is a great way to cut costs while still obtaining the necessary assurance you desire. Driving in South African roads have never been as cost-effective. If a person where to ask someone subscribing to PAYD “So, how does Pay As You Drive car insurance work?”, the likely answer would be “It works quite well for me, you should give it a try”.

Pay as your drive video review below: