(CBS 5) – A recently-approved type of car insurance could mean lower rates for California drivers who are cutting back on their mileage.
They’re called “Pay-As-You-Drive” policies. So far, three insurers are offering them: State Farm, Sequoia and Automobile Club of Southern California.
Most insurance policies determine coverage rates based on a number of factors, including mileage. For example, State Farm’s standard policy has two mileage categories, low and high. Its Pay-As-You-Drive policy has 39 mileage categories, intended to more accurately reflect how many miles a driver actually puts on his or her car. State Farm says reducing mileage by about 500 miles per year, could shave 1% to 2% off the cost of your premium.
Doug Heller of the group Consumer Watchdog – a group generally critical of insurance companies – likes the idea. “It’s unfamiliar territory for me to be applauding State Farm,” said Heller. He said the best policies are those with small increments in coverage levels because those are reductions consumers can actually attain. “If it’s not something people can really do, you might as well not have it,” said Heller.
Moira O’Neill-Hutson of Berkeley enrolled in State Farm’s pay-as-you-drive program last month. She said it was an easy decision because she drives less than 100 miles a month. “I think it makes sense to avoid paying for something you’re not going to use,” said O’Neill-Hutson.
As part of the deal, customers are required to report their mileage at regular intervals to make sure they’re staying on track. What happens if you they go over? According to State Farm, customers then jump to the next mileage level and are billed accordingly.
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