Pay-as-you-go Car Insurance Is The Newest Thing

Every heard of pay-as-you-go car insurance? If not, don't feel bad because some states just started experimenting with this new, different and cheaper alternative to conventional auto insurance. We all know the traditional auto insurance model, which involves prepayment of insurance premiums for a specified amount of time.

The legislature in California has approved this new pay-as-you-go car insurance, which is partly based on the actual mileage put on a car instead of a monthly flat fee. While California is not the first state to implement this program, they are the first to do it statewide. One of the main issues though, is that drivers will need to prove the actual mileage being put on the vehicles.

The "Verified Miles Plan" as it is called, will allow drivers who only operate their vehicles short distances to have a cheaper alternative to the standard car insurance available today. This bodes well for senior citizens that only go to the store and run errands rather than taking long trips across the state on a regular basis. The actual monitoring of the mileage will be done by either a third party or an installed GPS device.

This type of insurance will be available for purchase in blocks of mileage rather than a flat monthly rate for a specific time frame. If short, local trips are all that are made, a block of 20,000 miles may last the average person up to two years in some cases. Think of this like pre paid cell phone minutes for your car.

The Environment Defense Fund (EDF), which tackles the most serious environmental problems, predicts if one third of Californians participate in the pay-as-you-go-plan, over 50 million tons of greenhouse gas emissions can be avoided through 2020. This plan is optional and other more traditional car insurance options will still remain available. However, there are some controversies that come along with the new plan.

For example, what happens if the GPS tracking device is chosen for mileage determination? Can the insurance company then use this information against them? The insurance agents may want to use all information gathered to determine what type of driver you'really are? The speed, time of day and area are common pieces of data that can be garnered from the GPS tracking device.

Do you'really want your insurance company or agent knowing your every move? The insurance companies have to submit all the policy details to the state for the final approval and this type of policy may be offered as soon as January 2009. The program has been available in other states since the beginning of 2009. Prior to the California, the plan took shape in Cleveland, OH and Winston Salem, NC.

While there is more than one group who opposes the GPS tracking, there are other ways to report the mileage. This can be done through a third party monitor such as an inspection station or garage that has been certified by the insurance company to perform this duty. Once you have read all the options and decide how much you'really use your car, this may turn out to be the perfect solution for you.