Pay as You Drive Insurance (PAYD), also referred to as Usage-Based Insurance (UBI) is a type of car insurance policy that trades out fixed premium payments for variable payments based on usage. The plan is ideal for drivers who rarely use their vehicles or people who use their vehicles just to travel on a set schedule, such as to work and back.
PAYD insurance plans can dramatically reduce the costs of premiums for drivers such as these in addition to other drivers looking to be more deliberate about how and when they drive. Onboard telematics and GPS systems installed on your vehicle broadcast usage data back to insurers, so people who drive within a set mileage or range while demonstrating low-risk behaviors can significantly reduce their premiums through daily habits.
Read on to learn more about PAYD insurance and UBI policies, including the technical details of how they work as well as they benefits to policyholders.
How Pay as You Drive Insurance and Usage-Based Insurance Are Different
Traditional insurance premiums are charged based on historical data from the past several years. Actuaries and other insurance underwriting professionals study the relative risk of having to pay out a claim for each named insured based on several variables. For instance, a teenage male will be charged on the higher end of premiums — no matter how clean their driving record — because actuarial data shows that inexperienced drivers and especially young males tend to make poorer driving decisions and take excess risks.
PAYD insurance works by looking instead at your current driving behavior. Instead of assuming that because you are a teen male you are likely to speed, the insurance company will instead look directly at how often you do tend to drive over the speed limit. By monitoring your driving behaviors in addition to your overall miles travelled and typical tendencies, an insurer can calculate your relative risk effectively and in near-real-time.
Under this system, good driving behaviors can be rewarded within a few weeks in the form of lower rates. Additionally, driving mistakes like a moving violation ticket or a fender bender will not necessarily cause your rates to skyrocket for years on end as they might in a traditional insurance policy. Instead, individuals can develop habits for safe driving on a day-to-day basis with the motivation of lowered premiums behind it.
Most importantly, those who travel low mileage or who just make short, predictable trips will likely enjoy far lower rates than a traditional car insurance policy. Put simply: you pay just for the miles you drive, as opposed to paying just for the pleasure of being able to drive your own car!
Learn More About PAYD and UBI in Nevada by Talking With your Harris Insurance Agent
You can find the perfect PAYD or UBI policy to fit your needs by working with your Harris Insurance broker in Nevada today. By comparing your options, you can ensure you get the perfect service and all the coverage you need while likely lowering your premiums. Contact us to get started finding your perfect PAYD car insurance policy today!