Our motoring editor answers your questions on the pros and cons of pay-as-you-go insurance

Q

What is pay-as-you-go (PAYG) insurance and how does it work?

A

PAYG car insurance generally refers to pay-per-kilometre car insurance, so essentially you pay for the distance you drive plus a small monthly or annual fixed charge to cover the car for theft or damage while it’s parked. A tracker device or app is used to record how many kilometres you’re driving and this data is sent to the insurer.

Q

Is it available in Ireland?

A

Currently, PAYG car insurance is not available, but a survey from Peopl. insurance suggests there is a lot of interest in the product. When asked if they would like a pay-per-km/pay-per-hour option, one in three (33pc) Irish adults said they would “definitely” consider using this style of insurance, and a further 27pc said they could see the benefits of it, even if they didn’t use it.

Q

Who is this kind of insurance most suited to?

A

According to the survey, those over 55 were the most likely to be in favour of PAYG motor insurance, with more than four in 10 (42pc) of this age group saying they would “definitely” consider using it, but in reality this type of insurance would appeal to a wide range of motorists, including younger drivers who may find it hard to get affordable insurance, families with second cars, people who work from home or students who maybe only use a car at the weekends.

Q

What are the advantages?

A

The main advantage is if you drive less, you will be rewarded with a lower-priced premium. Since the pandemic, many people are driving fewer kilometres than they did so this type of insurance would be much cheaper than traditional car insurance. The other advantage is you can cancel the policy at any time if your circumstances change.

Q

What are the disadvantages?

A

If you underestimate your monthly mileage you could pay more. Also, the amount you pay may vary from month to month. To decide if it would be cost-effective, record your mileage over a typical month.