What is “Pay-as-You-Go Insurance?”

While a lot of people do own cars, not everyone uses theirs everyday – or even every week. Some drivers tick off 20,000km or more per year driving to and from work, to school activities, to friend’s houses, road trips, etc., while other people might sporadically use theirs to go into town. Everyone has their own unique lifestyle, and we here at Excalibur believe that your insurance coverage should be reflective of your needs. One of the great things about car insurance is that Canadian drivers may purchase what is referred to as “pay-as-you-go” insurance.

Don’t know what is? That’s fine! You can read our article here for more information on pay-as-you-go insurance or give an Excalibur Defender a call to discuss this option for low-mileage drivers.

What is it?

In the simplest terms, pay-as-you-go insurance is a form of coverage, also referred to as usage-based insurance, where you can reduce your car insurance rates simply by driving less. You’ll be required to purchase a device that monitors how often you drive and how much, and your potential discount will be based on that level of usage.

Some other forms of usage-based insurance focus on how you drive, not “how much.” This program is specifically for low-mileage drivers who may not use their vehicles every day. Typically, most pay-as-you-go insurance programs cap out at around 11,000 or 12,000km/year, but discounts are greater the less that you drive overall.

What are the rules of pay-as-you-go insurance?

The exact rules and parameters of this program vary from provider to provider. Ultimately, the principle is the same. Drivers will typically begin the process by prepaying a daily premium, which is gauged on their vehicle usage (there may be administrative fees on top of this.) Once they have prepaid this premium, they’ll gain access to a baseline of 1,000km distance. Each time they exceed that baseline, they’ll be “charged” – and the discount will lessen with each additional 1,000km accumulated.

The base principle is the less you drive, the more you save! Don’t opt into this program if you typically drive over 50km/day.

How is vehicle usage tracked?

To qualify for pay-as-you-go programs, drivers are often required to install devices in their vehicles that  track the operation of that vehicle. When the car is in motion, the device is automatically tracking the user’s driving distance. This device enables insurance companies the opportunity to collect the data that they require to gauge your discount amount.

Some systems will use a smartphone app rather than an installable device. These apps can be downloaded from whatever respective app store and will track usage using a GPS device. You likely won’t be able to choose a combination of these options, so select what works best for you.

CAA MyPace™

A branded form of Pay-as-You-Go auto insurance, CAA MyPace™ is an insurance program that is designed to reduce/manage your auto insurance premiums if you drive under a certain threshold per year. For this program, the cap is 12,000km/year (up from the previous 9,000km/year.)

This is the optimal way for low-mileage drivers to get the best out of their insurance. Drivers are only required to pay for the distance that they drive. They can decide at their own pace when they need to purchase more, reward themselves with significant savings, and more.

The savings increase the less you drive. If you only drive 1,000km/year, for example, you could save up to 70% on your auto insurance. You won’t save anything if you drive over 12,000km/year, but this is a great way for low-mileage drivers to save based on the distance they drive!

How does CAA MyPace™ work?

CAA MyPace™ is essentially a payment plan that you can use to manage your premiums. You enroll in the program and pay your initial base rate, in addition to your first 1,000km driven. Then, you install the MyPace™ device in your vehicle and allow it to monitor your usage by logging into your Account. Finally, drive! CAA will reload your next 1,000km on your behalf.

Who needs pay-as-you-go insurance in Canada?

This option is best for drivers who only spend a small amount of time driving. Drivers who can stay within a specific limit may be able to save up to 70% on their coverage. But, if you drive more than 12,000km a year (or so – each company or program may have a different threshold) then this program may not be the best tool for saving insurance. There are many other options for you to save on your auto insurance, which you can 100% discuss with the help of an Excalibur Defender!

Not every province offers pay-as-you-go insurance. Currently, it is only available in Ontario, PEI, New Brunswick, and Nova Scotia.

Also, not all car models qualify for insurance. Some vehicles, such as electric cars, diesel models made before 2005, and all models manufactured before 1997 typically do not qualify for this program.

For more information about pay-as-you-go insurance, give Excalibur a call to discuss.