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Pay as you go car insurance

Telematics, or pay as you go car insurance, is increasing in popularity — we take a look at how it works and the pros and cons to such policies

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For drivers only using their cars once in a while, the high cost of car insurance can be pretty hard to stomach. What’s more, drivers belonging to so-called high-risk groups, such as young and elderly drivers, are often hit with hefty premiums, despite only using their cars infrequently.

A solution could come in the form of pay as you go car insurance policies, which allow you to pay for only the amount you drive.

While pay as you go car insurance has until now been associated with black box insurance policies, innovative companies have begun to offer ‘true’ pay as you go car insurance cover.

Types of pay as you go car insurance

The following different types of car insurance policy could all be considered ‘pay as you go’, but of the technology is in its infancy and only some of these offer ‘true’ pay as you go capability:

  • Black box (or telematics) policies
  • Pay per mile car insurance
  • Pay per hour car insurance
  • Temporary car insurance

Black box car insurance

Telematics insurance technology works by having a small device, known as a ‘black box’, fitted to your car or by using an app downloaded to your smartphone. The box or app then uses satellite technology to track mileage.

Normally, drivers are charged a set amount per year and allowed to drive a certain number of miles before being charged extra. Pay as you go insurers allow you to top up in bundles of miles which you can roll over to the following year if unused.

Many telematics boxes also track things like acceleration, braking, cornering, and journey time, enabling insurers to take these factors into account when working out the cost of premiums. With most policies you can also monitor your driving behaviour online or via the app, and some insurers will offer rewards and discounts for drivers that demonstrate safe behaviour on the roads.

With statistics showing that young drivers are more likely to have accidents and make insurance claims than any other age group, this age group is likely to benefit most from black box car insurance.

In fact, drivers aged 17-21 with zero no claims could save an average of £1,282 by choosing black box insurance over a standard policy (based on quotes generated by uSwitch between November 2016 and January 2017).

Drivers using their cars outside of peak traffic hours could also save, as some insurers charge less for miles driven when the roads are emptier and accidents less likely.

Pay per mile car insurance

While some black box policies are based on the number of miles you drive, new technology is emerging that allows you to truly pay as you drive.

By Miles is the first insurer to offer this type of pay as you go cover in the UK. The policy is based on a monthly flat rate to cover your car while it’s not in use, plus a per-mile rate for the exact mileage you cover.

Mileage is measured by a Miles Tracker than plugs into your car, combined with an app on your mobile phone. At the end of the month you are billed for the miles you drive, as well as your monthly flat rate.

This type of ‘true’ pay as you go car insurance policy could be beneficial for drivers that don’t use their car on a regular basis, or those that use their car more regularly for short trips.

Pay per hour car insurance

You can also take out pay as you go car insurance based on time (rather than mileage), for example with Cuvva’s subscription option.

This type of policy works by taking out a subscription to cover your car while it’s not in use, plus using a mobile app to purchase cover by the hour or day when you plan to drive.

Temporary car insurance

You can also take out temporary cover on a friend or family member’s car if you need to borrow it for a short time (although they will need to have their own insurance policy in place too).

There are several options available, from hourly cover with Cuvva, to temporary insurance policies that could cover you for a month or more on someone else’s car.

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