Pay-as-You-Drive Car Insurance (PAYD): Coverage, Price & Who it's For

Also knows as pay-per-mile insurance or usage-based insurance (UBI), pay-as-you-drive (PAYD) insurance is a self-explanatory system in which you are charged according to your driving habits and how much kilometres you travel. But what do these formulas include, and are they worth it? Could you be the ideal candidate for a pay-as-you-drive insurance plan? All the answers to these questions are more below.

What is pay-as-you-drive insurance?

Pay as you drive insurance allows drivers to pay an annual car insurance premium based on how many kilometres they've actually driven.

Upon signing up, you and your insurer will evaluate your typical mileage in order to reach an agreement of a maximum number of annual kilometres you need to stay under.

Drive more than what was agreed to and you'll be fined, but drive less and you may, in some cases, be refunded the difference (or your remaining mileage credit will be carried over to the following year).

There are 2 types of pay-per-mile car insurance:

1. "To the nearest kilometre": your premium is set on a monthly basis, with a cap on the number of kilometres you can drive that month. While it is usually the cheapest type of formula, you do however need to stay under the number of kilometres planned, or you'll incur a hefty penalty.
2. The kilometre package: you purchase a "bundle" of typically between 4,000 and 20,000 kilometres. This gives you more flexibility than the first plan but is typically more expensive.

What does Pay-as-you-drive insurance cover?

Pay-per-mile insurance will cover you in the same way that a regular offer would, with the same types of guarantees.

Here are 3 the coverage options you can choose from:

• Third-party car insurance: this will cover solely the damage, material and physical, caused to others - drivers, pedestrians, passengers... - in an accident you are held responsible for. Any injuries or damage you suffer won't be covered
• Third-party insurance +: also known as "third-party, fire & theft" this includes third-party car insurance, in addition to coverage in the event of breakage, theft and natural disasters
• Multirisk auto insurance: this is the most complete, comprehensive type of coverage. It guarantees you compensation for damage caused both to others and yourself. While more expensive than third-party plans, it guarantees you total peace of mind.

Pay-as-you-drive insurance isn't that different from standard car insurance. It differs in that your mileage is estimated, tracked and taken into account when calculating your insurance premium.

How does PAYD insurance work?

When you opt for PAYD, a small tracking device is installed in your car, to calculate the kilometres you travel in real-time.

Your driving data is sent to your insurance company on a monthly basis, in order to adjust your bill if needed.

In most cases, you'll have access to an app on or online personal account via which you'll be able to check your mileage consumption to make sure you're within what was agreed to.

What are the advantages of PAYD insurance?

The “Pay as you drive” formula offers two major advantages:

• You only pay for the times when you've actually driven. Meaning, if you're not a frequent driver or if your car typically stays parked in your garage most of the time, you won't be wasting money on an "unlimited mileage" plan.
• Profiles considered "risky" (previously convicted drivers, for instance) can avoid penalties in the calculation of their premium, helping them save money.

Is Pay-as-you-drive car insurance suitable for you?

In general, you'll only really reap the benefits from this insurance if you drive less than 8,000 kilometres per year.

In doing so, you'll be able to save an average of 15% to 30% on your bills, compared to a conventional insurance contract. If, on the contrary, you use your car on a daily basis and travel over 8,000 kilometres a year, you'll find PAYD to be a sub-optimal solution and may well end up paying a lot more than with a standard contract.

Among those for which this usage-based insurance is well-fitted, there are:

• New or young drivers
• Previously convicted drivers
• Elderly drivers
• People who only rarely use their vehicle (if you tend to use other modes of transport a lot more often to get around, for instance).

How much does PAYD insurance cost?

How is a usage-based plan calculated?

Like for all insurance schemes, the price of a PAYD plan can fluctuate a lot from one user to another, as its calculation takes multiple factors into account, such as:

1. Your vehicle: brand, model, date of 1st entry into service, motorisation...
2. How much you use your vehicle on a daily/weekly basis
3. How many kilometres you travel per year
4. Where you park it (in a secured garage, in a public car park...)
5. Your personal situation: age, family situation, occupation, address, year of obtaining a driving license, driving history...
6. Any possible secondary drivers
7. The insurance company itself and its pricing policy

Examples of rates for PAYD plans

Just as an illustration, here are some example of prices for a variety of profiles.

• For a Peugeot 206, diesel, 2010: €13-€32/month or €160-€399/year
• For a Renault Clio IV, petrol (B98), 2015, parked in a secured garage: €13-€27/month or €157-€323/year
• For a Peugeot 3008 I - diesel, 2012 parked in a secured garage: €9-€34/month, €197-€372/year

NB: in all examples, quotes are based on the assumption the driver has a clean licence and no past accidents, that the driven obtained their licence in 200, and that the car is only used for leisure and going to work. Price brackets are given to illustrate how the type of coverage (third party/multirisk) affects rates. Prices are subject to change, always consult with your provider.

Finding the PAYD insurance right for you

Once you've decided usage-based insurance is right for you, start looking at the providers and offers that fit your needs and compare plans as much as possible.

You can do so via different means:

1. Online: we recommend proceeding this way, as it's the simplest and quickest way of gettings quotes and signing up. Get car insurance quotes directly on the companies' websites you're interested in, or, even better, use an online insurance comparator. You'll be asked to fill out a questionnaire to give info about your car and your situation (background, profession, number of drivers, etc.), and the system will instantly generate online quotes fit for your needs.
2. Over the phone: simply call the insurers you're interested in. In a few minutes, you'll be given a quote and the packages that will suit you and your budget.
3. In an agency: if you'd rather talk it through in-person, go into the agencies closest to your home and an advisor will draw up several quotes corresponding to what you're after. We don't particularly recommend this way of doing, as it requires more time and effort, especially if you want to compare quotes in several agencies.

The first thing to do before committing is to request quotes. You will thus have a good understanding of the market and what constitutes a cheap plan for your needs and profile.

Subscribing to usage-based insurance online

Ready to sign up? If you're comfortable using the internet, we recommend subscribing to an online scheme. Here's how.

How online insurance works

Online insurers don't have physical networks, meaning all procedures (declaring a claim, requesting a certificate, ending or managing your contract, adding guarantees...) are done online, via an app or by phone. This is how online companies can offer cheaper car insurance deals than those with physical agencies to sustain.

Once you have compared PAYD offers, you choose the one that best meets your needs and subscribe directly online.

Your insurance premium will be calculated based on the information (your personal situation, type of vehicle, etc.) you provided when comparing, and so will the compensation you receive in the event of an incident. This is why it's crucial to give your chosen provider the most accurate and precise information possible!

What documents do I need to provider my car insurer?

To take out usage-based insurance, you'll need to provide the following documents:

• Your registration certificate: your insurer will use it to calculate your premium, based on your profile
• A valid driver's license: it goes without saying that no car insurance can be purchased without one
• Your information statement: this document recaps your history as an insured driver (claims, history, details of the old auto insurance contract, etc.).