Forward Bank

Do you have a car but don’t use it very often? Are you wondering whether there is another way to pay for insurance without paying for full coverage for all the time you aren’t driving? There may be another way. It’s called usage-based insurance or pay-as-you-drive.

What is pay-as-you-drive?

This is a new form of auto insurance whereby the mileage used and driving behavior are what determine the premiums. In simple terms, it rewards drivers who drive less and drive safely.

How does it work?

Traditional insurance relies on your age, sex and location, as well as your credit score on some occasions, to determine your premium. However, usage-based insurance (UBI) calculates your individual rate by how much the car is used as well as other metrics, such as driving habits, mileage or how well you turn a corner. There are three types: pay-as-you-drive (PAYD) or pay-per-mile, pay-how-you-drive (PHYD) and manage-how-you-drive (MHYD).

What are the pros and cons?

Pro: it’s a win-win-win for the drivers, the insurance companies and, well, society. As long as you’re a sensible driver, you are only paying for the car when you use it. That’s best for the planet.

Cons: UBI uses telematics, which is mobile app-based hardware to keep track of how and when you use your vehicle. Though they are becoming more popular, many are worried about privacy breaches.

If you’re unsure about whether usage-based insurance is right for you, get in touch with us. We will be happy to drive you through it.