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Having a hard time understanding the ins and outs of how the insurance companies decide on the price of your car insurance policy? Here is a slant that you may not have considered. If at year end, your insurer sees that you haven’t been driving too much over the course of the year, they will reduce the cost of your insurance and get a price break.

As a matter of fact this has been an insurer mainstay for a long time – the low mileage bonus that they can arrive at either by inquiring of you how much you need to drive each day, or primarily by looking at how long you’ve had the car and how much you’ve driven. Another method of calculation is more accurate and delivers more to you. What the insurance companies are planning is that they’re going to calculate your premium completely on a per-mile basis.

They call this the usage-based car insurance policy. And in some places, it goes by the name of PAYD (pay as you drive). This works in effect to turn your auto into a sort of taxicab; they put in a discreetly-mounted meter on your car that will keep track of the miles driven each year.

Companies like Texas’ Progressive for instance, have been offering Texans a car insurance policy based on the meter called MyRate, for more than ten years now. Since the trial worked they plan is to offer this method of insurance throughout the country over this year. Actually, a clutch of states around the South like Alabama, Georgia and Louisiana, and several up North like Michigan, Maryland Oregon already have this option.

When you sign up for a PAYD car insurance policy, the agency sends an installer to place the wireless device on your vehicle. Usually, it finds its home on the underside of the steering column on your car, and it collects more than just how many miles you drive. Pretty often, it records information about your driving style, and how often you use your car. The device uses a wireless connection to the company – where they put your driving information together with other traditional factors that affect your insurance, what your age is, your sex and your driving record, to set up a custom car insurance policy just for you. If you hardly use your car, you could actually shave half off your traditional insurance premium. Get better rates by comparing car insurance premiums today.

On the other hand they find out that you are driving at top speed and drive a lot at night when they know that the statistics say most accidents occur, you’ll pay more – about ten percent. This device likely tell them what areas of town you are driving in, so that they can tell if your chosen area is high accident risk or not. It will even know if you are speeding one morning, and really stepped on the gas for about 5 seconds to quickly get to 40 mph in just 3 seconds – and boy, will you pay. Get ahead of the curve and compare:  buy auto insurance online today. 

Most car insurance policy majors are testing out a version of the PAYD scheme now with volunteers and their own proprietary devices – Allstate, State Farm, The Hartford – the entire shooting match. It is to help everyone to keep an eye on the way they drive, and cut out wasteful miles. And parents can get a clue as to what their kids driving habits are like, too.