Drivers could have saved up to 48% in 2020 by using PAYG car insurance


img
Drivers could have saved up to 48% in 2020 by using PAYG car insurance

Image Source: Getty Images




At a time when every penny counts more than ever, do you know that you can save significantly on your? car insurance by switching to a pay-as-you-go (PAYG) policy? A new study by Finder.com has found that UK motorists could have saved up to 48% by using PAYG car insurance in 2020.

Chart your path to financial freedom with our Hero Journey Tool!

MyWalletHero is here to help you learn more about taking control of your money, whether that’s paying off debt, working toward a short-term money goal, or investing for your future.

This tool can help you understand the next steps on your journey – just pick a target that best describes your current interests to get started.

What is PAYG insurance?

PAYG car insurance calculates your premiums based on when and how long you drive. You will be charged for each mile or hour driven, in addition to a monthly or annual fee that covers incidents such as theft or damage to your car when it is parked.

Depending on the policy you have chosen, some carriers may also monitor how safe you drive. If you are considered a safe driver, you will see this reflected in your premiums.

Why is PAYG car insurance cheaper in 2020?

Well, people are driving less this year. This could be due to the lockdown restrictions that have been in place for much of this year. This has resulted in up to 60% of the UK population working from home for at least part of 2020.

As a result, average mileage per car in the UK is expected to fall by as much as 16% this year. This does not take into account the November lockdown, meaning the figure could be even lower.

How much can you save with PAYG car insurance in 2020?

To find out how much UK drivers could save with PAYG car insurance, Finder.com used three low-risk, medium-risk and high-risk driver scenarios to get the average premium for each based on the 10 most popular cars in the UK in 2020.

They estimate that each driver’s mileage would be 16% lower in 2020 than in 2019.

In the end, they found that the high-risk driver would have saved an average of £783 on insurance by 2020. That’s because under traditional insurance this driver would have paid £1,628 while with PAYG the cost would have been £845. This translates into a saving of 48%.

The medium-risk driver would have saved £194.

Interestingly, the low risk driver whose traditional policy premium is £204 would have paid £305 for PAYG. That’s 50% more. So this driver would have been better off sticking with traditional insurance.

Who can benefit from PAYG?

There are several categories of drivers who can make huge savings on their insurance costs by opting for PAYG car insurance.

Young drivers, for example, are often classified as high-risk by insurers because of their relative inexperience on the road.

Insurers see them as more likely to cause accidents and make insurance claims than any other age group. For them, this usually means higher premiums. PAYG could help reduce costs for this group of drivers.

according to Uswitch, drivers who use their car outside peak hours can also save on their insurance with PAYG. That’s because some insurers charge less for miles driven when the roads are empty and accidents are less likely.

Drivers with a driving or criminal conviction who also have to pay higher premiums from traditional insurance can also benefit from PAYG.

On the other hand, it would be cheaper for drivers who are considered to be low-risk — for example, older drivers with more driving experience and a long history of no-claims — to purchase traditional auto insurance.

In addition, if you drive a large number of miles each year, for example if your job requires you to travel long distances every day, you may pay more with PAYG than with a traditional policy.

What it comes down to:

While the final decision is yours, it’s worth checking out PAYG car insurance. You could potentially save big on your insurance costs, something your wallet will thank you for.

The extra money can be put to good use elsewhere. You could also use it to savings. Or, if you can withstand a little risk, you can even invest it in a… shares and shares ISA for potentially higher returns.

4 rock-solid rules to save money on everything

Our editor Sam Robson has been on a personal cost-cutting mission for years – and it’s time to share his wisdom.

Check out his top-rated saving tips and tricks in this free report, “Sam’s 4 Rock-solid Rules for Saving Money on Anything”.

Enter your email below for instant access to your free copy.


Some of the offers on MyWalletHero are from our partners — that’s how we make money and keep this site going. But does that affect our ratings? No. Our commitment is for you. If a product isn’t good, our rating will reflect that, or we won’t list it at all. While we strive to offer the best products available, we don’t review every product on the market. Read more here. The above statements are from The Motley Fool’s only and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, serves on the board of directors for The Motley Fool. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard and Tesco.


This div height required for enabling the sticky sidebar