Cut premiums with pay-as-you-drive auto insurance
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"People who have multiple vehicles in their household can benefit if they have one vehicle that isn't driven as much," Hutchinson says. That car could be in a pay-as-you-drive program, while the other vehicles are insured with traditional coverage.

The insurance company would still need to determine a driver's regular rate before it could offer the discount.

"If you call for a quote, you'd still go through the data collection exercise of providing your name, address and type of vehicle," Hutchinson says. You'd also be expected to provide personal information, such as your marital status, Social Security number and prior insurance history.

If you're a candidate for Cleveland-based Progressive's low-mileage program, called MyRate, you'd be invited to join after receiving your initial quote. As a first-timer, you could earn a policy discount of 10 percent off your regular rate.

When it's time for the policy to renew -- typically in six months -- the rate would adjust based on your driving habits. Customers generally receive a discount of 10 percent to 15 percent each term period, Hutchinson says.

2. You may have to pay for the high-tech gear. Most drivers who sign up for Progressive's MyRate program have to pay $5 per month for the device they install in their vehicle. "That covers the technology involved and the transmission expense, because it is a cellular device," Hutchinson says.

The equipment is about the size of a cigarette lighter, and it connects to the vehicle's diagnostic system. Insured vehicles need to be a 1996-or-later model in order to support the technology, he says.

Under GMAC's version of the low-mileage insurance program, customers must be active subscribers of OnStar, an auto security and emergency-assistance system, before they can participate. OnStar is a wholly owned subsidiary of General Motors, and the service is only available in newer GM cars, mostly 2004 models or later.

A subscription to OnStar costs about $200 annually, although the first year is complimentary for newly purchased autos. That subscription price might wipe out some or all of the savings gained from the discounted auto insurance, but it also can be viewed as a way to subsidize OnStar's annual fees, O'Donnell says.

Before signing up for any program, consumer advocates say drivers must read their contracts carefully to make sure there are no surprise costs or fees.

"The most important thing a driver can do is be informed," says Carolyn Gorman, a Washington, D.C.-based vice president with the Insurance Information Institute.

3. Pay-as-you-drive insurance isn't offered everywhere. Each state has an insurance department that must approve this relatively new type of coverage, so the programs aren't offered everywhere. For the states that do have this coverage, only a few insurance companies offer it.

In 2007, GMAC Insurance rolled out its OnStar program in 34 states. Progressive's MyRate is available in only nine states: Alabama, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, New Jersey and Oregon.

"More are coming," Hutchinson says.

The Hartford insurance company recently concluded a six-month, pay-as-you-drive study in Connecticut and is analyzing the results before making a decision on expansion, says Thomas Hambrick, spokesman for The Hartford. "We are excited about the possibilities that vehicle telematics technology can offer."

Unigard is testing a pilot program, but only in the state of Washington. "It's still in process," spokeswoman Anne M. Smith says.

In California, a bill before the legislature may open the door for drivers there to participate in voluntary mileage-based insurance. The intent is to reduce greenhouse emissions in the state by offering vehicle owners an incentive to drive less.

It's a laudable goal, says Holober, the California-based consumer advocate, but he says he still has concerns. For example, drivers of older cars wouldn't be able to receive the lower rates, since their vehicles couldn't use the required technology. "Everyone should have access to the discounts," Holober says.