When you get an electric bill, you only get charged for the kilowatts you use. When you get a water bill, you only get charged for the water you use. But, when you get your auto insurance bill, you get charged a flat rate for the entire month regardless of how much you drove your car. Wouldn’t it make more sense that you should only get charged for the miles you drive? Why would you want to pay the same premiums as someone who drives 100 miles a week when you only drive 20 miles? That’s where pay-as-you-go car insurance plans come in.

The name is pretty much self explanatory, but there are a few things behind the inner workings of unique pay-as-you-go insurance plans available through several providers. Basically, with this kind of plan, which has been around since 1929, you pay a variable rate of insurance based on the miles you drive.

The way insurance companies charge you is with a small device that is installed in your car, which monitors the miles you drive. It has a small transmitter that reports the miles you drive to the insurance company at the time of the month you choose with your provider. You can also opt to install mile meters that will track speed patterns, estimated gas mileage, and there are rumors that GPS will soon be integrated into the meters as well. Unfortunately, the startup cost of pay-as-you-go car insurance is a little more expensive because of the cost to install the mile meters, but there are other benefits to investing in pay-as-you-go car insurance.

One great thing about pay as you go insurance is that it allows for easier green incentives for driving less. In Oregon, there is already over $1,000,000 in tax credits for pay as you go car insurance customers. Also, there is a hypothetical national government program in the works that would pay a 10-percent tax credit to the value of your pay-as-you-go insurance policy pricing.

The individualized approach of pay-as-you-go car insurance has caught the eye of a lot of Americans lately. It helps provide a plan that is tailored to your needs specifically and not as much to a general age group, model of car, or location. Also, by encouraging people to drive less in order to save money, pay-as-you-go car insurance is promoting a greener U.S. economy.

—AJ Register