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- Pay-as-you-go Car Insurance
What is pay-as-you-go car insurance?
How often do you drive? If you get behind the wheel every single day then an annual insurance policy is probably right for you.
If you only drive occasionally – maybe you commute into your workplace via public transport during the week or are retired and no longer need a car on a daily basis – a cost-effective cover option could be pay-as-you-go car insurance (PAYG). This is a flexible alternative to traditional annual policies.
PAYG insurance is not appropriate for high-mileage drivers as it can easily become quite expensive.
Is pay-as-you-go car insurance right for you?
Type of driver | Why you should choose PAYG insurance |
Occasional | If you only drive occasionally or have low annual mileage, PAYG insurance may end up cheaper than a standard policy. |
Student | Only drive when back home? PAYG insurance allows you to only pay when you're driving the car. |
Retired | Don't drive as much as you used to? PAYG or temporary car insurance could save money against the cost of an annual policy. |
Convicted | If you've been convicted of a driving offence, you could face a huge increase in your insurance premium. PAYG or temporary cover could save significant amounts of money when you need to drive. |
Second car owner | Do you have two cars but drive one much more than the other? Use temporary or PAYG car insurance when you want to drive the second one. Just make sure you declare it SORN if you don't drive it at other times. |
Types of pay-as-you-go car insurance
There are a few types of pay as you go car insurance, and the best option for you will depend on individual needs.
Pay-per-mile car insurance
This PAYG cover charges depending on how long you spend driving, so the less you drive, the less you pay. An option for low-mileage, convicted or younger drivers.
Pay-as-you-drive insurance
This usage-based insurance is aimed at new drivers. It uses telematics or a black box device to track and measure how safely you drive and calculate your premium.
Temporary car insurance
Need cover for a few hours, days or weeks? Temporary car insurance gives you comprehensive coverage for a fixed period. An option when you need to borrow a car, take a test drive or collect a new vehicle.
How does pay-as-you-go car insurance work?
- Pay-as-you-go car insurance is based on how much you drive.
- Pay-per-mile tends to charge a base rate per month and then a set amount per mile driven.
- Pay-as-you-drive considers your driving habits. If the telematics system deems you to be safe, your premium will be lower.
Temporary car insurance covers you for a set amount of time. At Tempcover, we offer flexible coverage from one hour to 28 days. Once you have your policy, you can drive the vehicle with the peace of mind that comprehensive cover provides.
How do I keep track of my mileage?
There are a few options for keeping a log of how many miles you drive:
- Download a mileage tracker app - MileIQ and TripLog will automatically track your driving. You can even classify if the trip was business or personal.
- Track your miles on a spreadsheet - Make a note of the odometer reading at both the start and end of each trip.
- Write them down in a notebook - There's nothing wrong with pen and paper. If you prefer to write down your mileage in a notebook so you have something physical to look back on, this is the option for you.
What does pay-as-you-go car insurance cover?
Pay-as-you-go car insurance policies will fall under three types of insurance cover:
- Fully comprehensive – the highest level of protection, covering many different risks.
- Third party – covers third-party injuries and property damage only.
- Third party, fire and theft – covers theft, accidents, fire damage and other people, their vehicles and property.
While most PAYG policies are likely to be fully comprehensive, check the details when arranging a quote. Tempcover’s temporary car insurance policies are fully comprehensive and will not affect any existing no claims discounts.
How much does pay-as-you-go insurance typically cost?
Prices of PAYG car insurance can vary depending on factors including the driver’s age, experience (including convictions or penalties), mileage and the type of car being covered. Your address and occupation may also be considered.
Pay-as-you drive insurance tends to have an upfront payment or monthly fee and then will charge by mileage. Usage-based insurance – or black box insurance as it’s sometimes known – also often lowers premiums in exchange for your driving data. You could end up paying more, however, if you consistently tend to break the speed limit or have a habit of braking suddenly.
What are the benefits of pay-as-you-go insurance?
- You have more control over the price of your premium. If you are an occasional driver or only need insurance when borrowing somebody else’s car, it may end up cheaper than paying out on a 12-month policy.
- With pay-per-mile, you can evaluate how much you want to pay and tailor your driving accordingly
- Pay-as-you-drive will reward you with lower-priced premiums if you drive safely.
- With temporary car insurance, you know exactly how long you’re covered for – potentially to the hour of your choosing.
All of these PAYG insurance policies are more tailored to occasional drivers than frequent ones.
Some drivers may have issues with the dependency on telematics. They may be wary of privacy concerns and errors in tracking data that could have a negative impact on their insurance premiums.
What is the difference between pay-as-you-go car insurance and temporary car insurance?
With pay-as-you-go car insurance, you are likely .to pay a lower base rate and then pay for the exact number of miles you drive. With temporary car insurance, you tend to pay one fixed fee for a time period of your choosing.
Low-mileage drivers may use PAYG insurance as their main insurance policy, while temporary policies are used more when you only need to drive a vehicle for a short amount of time.
Can I get pay-as-you-go car insurance to drive my parents' car?
Yes, you can. Do your research to decide which PAYG car insurance policy is right for you and then get a quote. You’ll be on the road in your parents’ car in next to no time.
Pay-as-you-go Car Insurance FAQs
Young drivers often face expensive premiums after passing their test – and this could be on top of buying their first car. To save money, these drivers could look into pay-as-you-go insurance.
These options include pay-per-mile insurance (the less you drive, the less you pay), pay-as-you-drive insurance (the safer you drive, the lower your premium) and temporary car insurance (you’re in control of how long you have comprehensive cover for).
Various factors determine the price of pay-as-you-go car insurance. Do your research and shop around, ensuring the PAYG insurance covers everything you need it for. Temporary car insurance has a set fee for the time you use it, pay-per-mile depends on how far you drive and the usage-based pay-as-you-drive (PAYD) policy will determine your premium based on how safely you drive.
This will depend on how far you are planning to drive. When you’re charged per mile, you will have to pay less when you drive less. If you are planning on various long journeys, you might be better off with an annual policy or temporary insurance if these journeys are planned over a number of weeks.
It’s unlikely that you will have to pay a deposit for pay-as-you-go (PAYG) insurance but you should always check the details, including the small print, when taking out any insurance policy. This should provide details of any deposit.
The cost of pay-per-mile insurance is uncertain, with estimates ranging from 4p to 15p per mile. However, government officials have assured drivers that costs will not exceed those of current insurance methods. Therefore, despite the lack of finalised pricing, it's unlikely you'll pay more.
Pay as you go car insurance is beneficial for infrequent drivers or young drivers with high premiums. It's cost-effective for low mileage users or rarely used second cars. Various types exist, each with unique operational aspects. Consider your individual circumstances to determine if it's the right choice for you.
Pay-as-you-go insurance offers flexibility but may not suit everyone. It can be costly for those driving over 6,000 miles frequently. Some providers impose age restrictions and limit or exclude no-claims bonuses, disadvantaging safe drivers. Additionally, having a device tracking your car's movements may raise privacy concerns.
Exceeding your agreed mileage can result in denied insurance claims, policy cancellation, increased premiums, excess mileage charges, or accusations of contract breach. To avoid these complications, provide accurate mileage estimates, monitor your usage, and inform your provider if you expect to exceed your allowance. This ensures policy validity, prevents extra charges, and maintains a good relationship with your insurer or leasing company.
