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January 20, 2022

Pay-as-you-drive car insurance coming to Canada?

If you drive infrequently, you could save a bundle car on insurance by paying as you go, rather than a flat amount for coverage every six months. According to a report by the Brookings Institution study, the average driver would save $270 per car with such a mileage-based insurance policy.

Driving The theory is that insurance companies can offer lower rates to people who seldom drive and are deemed less risky. The problem, of course, is that few drivers have the option of buying pay-as-you-drive (PAYD) coverage.

But this type of insurance appears to be gaining traction south of the border as some states consider ways to reduce traffic congestion and carbon emissions.

About 10 auto insurers have added or started testing pay-as-you-go policies in the past two years, the Dallas Morning News reports. PAYD policies are now offered in about 35 states by insurers such as Progressive, American Family and GMAC Insurance.

"The less you drive, the less you pay," claims MileMeter, a fledling insurer only available to drivers in Texas.

So how much can you save? MileMeter says its average customer pays about $200 a year, in increments of up to 6,000 miles at a time, while the average Texas driver pays $854 annually.

PAYD plans work best for retirees and college students who don't drive much, public transit users who need a weekend car and families with an extra car they drive only occasionally. And initial users seem happy.

"It's been great," says MileMeter customer Rebecca Jackson. "I (fly) 95 percent of the time for work, so I have a 3-year-old car with 15,000 miles. I can pay for what I need."

Jackson, who drives up to 4,000 miles a year, now pays about $600 a year for full coverage that used to cost her $1,400

Not in Canada, true, but you never know. Look at Britich Columbia, for instance.

Would you buy a pay-as-you-drive policy if you could? Are you aware of any potential offerings in your province?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...