Pay As You Go Car Insurance: Is It Right for You?

What Is Pay As You Go Car Insurance?

Pay As You Go (PAYG) car insurance lets you pay for coverage based on how much and how well you drive. This is different from a basic yearly car insurance plan, where you would pay a set fee. With PAYG, the insurance company tracks the number of miles you drive using telematics technology. Your driving behaviour may also be recorded. Your premium then depends on this data instead of one flat price. This way, you are only paying for what you use.

It is good for people who do not drive a lot or just use their car sometimes. This can be for remote workers, students, retirees, or families that have a second car.

PAYG policies are getting more popular in the UK every year. This is because more people use app-based insurance companies, and because people now want pricing that matches what they need.

How Does PAYG Insurance Work?

There are two main types of PAYG insurance:

1. Pay Per Mile

You pay a monthly fee. You also pay more money for every mile that you drive. The number of miles is checked using a telematics device or a plug-in box in your car. This helps to keep track of your mileage each month.

2. Pay How You Drive (Telematics)

This model does not charge you by the mile. It looks at your driving habits, like how fast you go, how you brake, how you turn, and the time of day you drive. If you drive safe, you can get lower prices. You most often use a mobile app or a small device in your car to keep track of this.

Most providers give you a dashboard in the app. You can use it to see your mileage and billing details. It also lets you look at your safety score and get proof of insurance.

Who Should Consider PAYG Car Insurance?

PAYG is best suited for:

• Drivers who drive less than 6,000–7,000 miles each year
• City drivers who use buses or trains most of the time but keep a car for trips on weekends
• Retired people or those who work from home
• Learner drivers who need car insurance for a short time
• Families or people who live together and have more than one car

If you do not drive a lot or only take short trips from time to time, Pay As You Go car insurance can help you save money. You may find it is cheaper than paying for a regular yearly car insurance plan.

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What Are the Benefits?

• Fairer Pricing: You will only pay for the miles you drive or the time you use the car.
• Lower Premiums: This can be good for people who drive less or have safe driving habits.
• Real-Time Tracking: You can use an app to see your driving habits and how much you drive.
• Flexible Policies: Some PAYG insurance plans let you top up or get short-term cover when you want.
• Eco-Friendly: These plans help people drive fewer miles and build better driving habits.

What Are the Drawbacks?

• Black Box or App Tracking: Some people do not like that they can be watched while they drive.
• Penalty Pricing: If you brake too hard or drive at night, you may have to pay more.
• Coverage Limits: You might have to pay extra if you drive more miles than you planned.
• Complex Billing: The cost is made up of a base rate plus a fee for each mile, so it can be hard to know what your bill will be.
• Limited Providers: Not every insurance company has PAYG policies yet.

Average Cost of PAYG Car Insurance

Prices vary, but here’s a general example:

The figures shown are examples. They may change based on your age, car, and who provides the service.

Which Insurance Companies Offer PAYG Policies?

Some of the top UK providers that have PAYG options are:

• By Miles lets you pay for your car insurance by the mile. This is good for people who do not drive too much.
• Marmalade is made for young and learner drivers. It can help them get insurance that fits what they need.
• Cuvva gives short-term car insurance and pay-as-you-go policies. You can buy and manage your cover with their mobile app on your phone.
• Zego is there for people like delivery drivers and part-time motorists. Their insurance lets you pay by the mile or only when you need to drive, making it easy to use.

Most of these insurers use an app first. You can sign up by using the app. It is easy to manage your policy on the app, too. You can get your proof of insurance there as well. If you need to deal with cancellations, you will do that online with the app. All of this can be done without having to go anywhere.

What Happens If You Go Over Your Mileage Limit?

You can often add more mileage using the app. These charges will show on your next bill. Some policies will let the app top up your mileage for you, while others will ask you to do it by yourself. It is important to keep an eye on how much mileage you use. This can help you avoid any extra costs or problems with your policy.

How Do I Cancel a PAYG Policy?

Most PAYG policies work as monthly rolling contracts. This gives you the freedom to stop at any time. You can usually start cancellations from the mobile app or by sending an email to your provider. Always look at the terms for any notice time and cancellation fees.

Is PAYG Insurance Right for You?

If you only drive now and then, like using digital tools, and want a car insurance policy that matches how you use your car, PAYG car insurance can be good for you. It is a way to pay based on your real mileage. This makes it a smart and good choice for some people. But, if you drive a lot, do not have a set plan, or feel uneasy with telematics in your car, this kind of insurance may not fit you well.

Correct as of 28 July 2025

FAQs About Pay As You Go Car Insurance