insurance

Cheap car insurance: pay as you drive

Do you drive less than 15,000 miles per year? You may be paying more than you need to for car insurance. Cheap insurance can be a reality with a new concept in auto coverage: usage insurance, or pay as you drive, or PAYD.

Pay as you drive programs work by using a high-tech device installed in your vehicle that records actual miles traveled. Automotive systems companies such as OnStar provide the driving data to the insurance company. In return, participants who don't do a lot of driving often get discounts of 25 percent to 50 percent off their premium.

Not available in every state

Pay as you drive insurance is available in 34 states, but only a handful of auto insurance companies offer it, some as pilot programs. These include Progressive Insurance, Liberty Mutual, MileMeter, GMAC Insurance, State Farm, Mutual Auto Insurance and Allstate.

Not only can PAYD save you money, but it also helps lower your carbon footprint. And estimates are that if the every motorist purchased accident insurance per mile, driving would decline by 8 percent nationwide and the total U.S. carbon dioxide emissions would drop by 2 percent.

PAYD caveats

While usage-based auto insurance programs may seem great for those who don't rack up a lot of miles, they don't come without controversy.

For one, the use of monitoring technology makes some insurance consumers -- as well as state regulators and consumer advocates -- nervous about privacy. The technology used not only registers miles but can monitor driving behavior, such as when you drive, how often you brake and accelerate, and when you drive over 80 mph.

Most devices do not use GPS to track location. But if you're not careful, you can trigger surcharges, making your cheap insurance more expensive if you go over a mileage limit.

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