Is pay-as-you-go car insurance best for you? – Drive

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If you don't drive a lot, you can save on auto insurance

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Joel Kranc, LowestRates, approx An insurance document. An insurance document. Photo from Stock Photo /Getty Images

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Most of us understand how traditional Car insurance is working. You pay an annual premium to protect yourself and your vehicle in the event of an unforeseen accident. In general, this fee stays the same from year to year, but it can vary depending on where you live, your age and of course whether you are making a claim.

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But what if you are not an everyday driver or have family members who drive little to no car? Do you really have to pay an annual fee? Not necessarily.

What is pay-as-you-go car insurance?

The contribution insurance falls under the umbrella of usage-based insurance , which uses telematics to keep track of how a person drives and then reward or punish them in the form of either reduced or higher rewards. There is subtle differences between the two , However. While the usage-based insurance is based on how You drive (cornering fast, braking hard, etc.), pay-as-you-go insurance centers in the area how much you drive.

The Canadian Automobile Association (CAA) was the first to offer a pay-as-you-go system in Canada when it launched its MyPace program for drivers in Ontario in 2018.

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  1. The advantages and disadvantages of usage-based insurance

    The advantages and disadvantages of usage-based insurance

  2. The difference between telematics, UBI and usage-based insurance

    The difference between telematics, UBI and usage-based insurance

As part of a usage-based driving style, the drivers pay a daily premium with an additional fee that depends on the distance traveled. It starts with 1,000 kilometers and for every further journey a fee is charged for every additional 1,000 kilometers. CAA has increased the limit to 12,000 kilometers from November 2021.

Drivers have to connect a telematics device to their car that records the route, time and speed. Alternatively, customers can download the CAA Connect app, which monitors a vehicle's travel data using an integrated GPS antenna. CAA's website states that customers cannot combine the programs, which means that you are either a MyPace customer or a CAA Connect customer, but not both.

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The device warns the driver when he is approaching the end of a 1,000-kilometer step. However, not all cars are compatible with the device, e.g. B. Electric cars, cars manufactured before 1997, and diesel vehicles manufactured before 2005.

How much money can I save with pay-as-you-go insurance?

The less you drive, the more you can save with pay-as-you-go insurance – between two and 70% compared to normal car insurance. As you get closer to the 12,000-mile limit, the savings decrease. Often times, you will be automatically billed for the next 1,000 kilometers when you reach the 950 kilometer mark. If you stay below the 1,000 limit, it can be carried over to the next billing cycle.

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Even if your distance is recorded, the rate you pay per kilometer is based on traditional factors such as your driver's license and years of driving experience.

Is pay-as-you-go insurance right for you?

The benefit of PAYG auto insurance is really for drivers who do not drive that often. If you cross the 12,000 mile limit, the cost is likely to be similar, if not the same, to traditional auto insurance. The pay-as-you-go system is best for:

  • People who mainly use public transport to get around
  • Those who work from home, which is particularly relevant during the pandemic
  • Families who only need driver guidelines occasionally
  • Seniors or people who do not commute to work but still need vehicles

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To date, pay-as-you-go insurance is only available in Ontario, New Brunswick, Nova Scotia and Prince Edward Island; the other provinces have not yet approved the system.

Should you get into a collision, the claims process with pay-as-you-go insurance remains the same as with normal car insurance. Ultimately, if you keep the kilometers to a minimum, the system can work to your advantage. During the pandemic, many drivers have switched to this system , and many more may do so as an option given the new realities of remote working.

If you're not sure if you want to try pay-as-you-go insurance, remember that you don't have to commute too long to hit the 12,000 mark. So make sure it is suitable for your driving needs. As always, it is best to speak to your broker or insurance provider about the pros and cons of changing your policy.

LowestRates approx is a free and independent price comparison website that allows Canadians to compare prices from over 75 vendors on a variety of financial products such as auto and home insurance, mortgages, and credit cards.

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