With the poor economy the country is facing, there have been many people canceling their auto insurance, or working hard to reduce what they spend on their premiums. In fact, the Insurance Research Council reports that they found that while the majority of people want to maintain their insurance, 28 percent had shopped for lower rates, and 15 percent had increased their deductibles to save money. Of those in the study, nine percent had canceled their insurance all together.
So what is one to do if he needs a vehicle for at the very least work or emergency purposes, yet cannot afford to pay the auto insurance rates? California may just be on to an answer to the problem. And it may be one that not only helps people save on their premiums, but also helps the environment. This week Insurance Commissioner Steve Poizner, of the California Department of Insurance, announced details of a proposed plan that would allow people to pay for insurance only for the miles that they drive.
Paying as You Go?
While the idea of only paying insurance on the miles you drive may seem a little odd, it’s really quite simple. Think about it in terms of cell phones. Most cell phone plans follow a pay-as-you-go model, whereby people are charged for the minutes they use. Auto insurance that you pay by the mile would work the same way. Consumers would be able to purchase a block of miles from an auto insurance company for a set price and time frame they are good for. Once they are used up, they would just purchase more as needed.
In order for insurance companies to know how many miles the person has driven, they would arrange verification at insurance companies, smog testing stations, auto repair dealers, and the like. With this type of plan, consumers would prepay for their insurance based on a price per mile option.
The Potential Benefits
For those who maintain insurance on their vehicle yet rarely drive, this could be an effective way to help save money each month. For those with long commutes to work, it could be motivation to start carpooling. Both are motives the state find to be positive.
As this new insurance plan option moves closer to becoming a reality, others may find it is a welcome relief and alternative to canceling the current plan not fitting into the budget. If all goes well, other states may take California’s lead and allow drivers to “pay-as-you-drive” when it comes to insuring their vehicle. Watch for the plan to be put in place by year’s end, if not sooner.
