A car insurance product

What is it? A car insurance product which the promoters say could significantly reduce a person's premiums.

Pay As You Drive from Real Insurance allows qualified motorists to pay only for the kilometres they plan to travel.

What are its features? Pay As You Drive allows motorists to cover their vehicles based on how far they drive. Motorists can buy kilometres and are covered until they complete that distance. Anyone driving less than the average for people with the same insurance profile should pay less than they would for traditional comprehensive car insurance. Those who qualify get comprehensive car insurance with a minimum annual premium and purchase insurance for the kilometres they expect to cover in that vehicle. Unused kilometres never expire -- they can be transferred year to year or be refunded and customers who are about to run out of kilometres can apply to purchase additional kilometres. Pay As You Drive reminds customers when they may need to top up their kilometre balance with a sticker for their windscreens and SMS messages to their phones. People who have not made a claim against any of their Pay As You Drive policies for three years in a row receive 10 per cent of the total premiums paid in that time. Similar insurance products overseas require policy holders to have their vehicles equipped with monitoring devices. Pay As You Drive in Australia relies on the customer reporting the odometer reading of the vehicle insured.

What are the advantages? Pay As You Drive is suited to people who drive to and from the train station or work close to home and perhaps use their cars on weekends. It also suits those who have a second or third car.

What are its disadvantages? Pay As You Drive is not for everyone. It works for people who drive less than average. Motorists who drive a lot are actually being subsidised by traditional car insurance, so Pay As You Drive won't work for them. Pay As You Drive is available only to drivers over the age of 25.

What does it cost? Pay As You Drive claims cost savings of "up to 60 per cent on car insurance per annum". A 29-year-old Parramatta man who owns a Mitsubishi hatchback would typically pay $981 a year for insurance, but if he only drives 5000 kilometres, he would pay $316 per year with Pay As You Drive.

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Another "budget" car insurance for us. Check out this site for more car insurance options.