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Pay as You Drive Auto Insurance
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Pay as you drive is a new insurance concept
that has be recently passed into law as of January
1, 2004 in the state of Texas. The new law allows
insurance companies to offer Texas car owners
the option of instead buying insurance protection
on a cents-per-miles-driven basis much like the
way consumers buy gasoline. The less they drive,
the less they pay for insurance.
Under the current insurance plans, a driver
will pay the same amount for car insurance whether
driving 20,000 or 5000 miles per year. It is
a strong possibility that many drivers could
pay more for insurance on pay as you drive policy
depending on how often they drive; however, is
it fair for the people who drive less or car
pool to work to pay the same amount of car insurance
as those who drive more?
How does Pay you drive work?
Car insurance companies use the following criteria
to determine your rate: zip code, car and type,
driver type and other information about your
household. The company then places your car
into a group paying plan for a year. The company
then determines the average miles per year
for your group. The mile rate for you car would
be equal to group paying plan/ miles per year.
Example:
If your group paying plan was 500 dollars a year and average miles per year
was calculated to be 12,000 miles a year. Your mile rate for your car would
be 4.1 cents a mile.
If you choose the mile rate instead of the annual
rate, you might purchase 3,000 miles for $123
(=4.1cmi * 3,000mi.) plus nominal expense fee.
If it looked like you were going to drive over
the limit, the miles would have to be purchased
before driving.
Does pay as you drive seem like an attractive
option for you? Here is what you should do!
- Tell you state legistators
- Learn more about mile-rate choice, and tell your
friends
- Get a cents-per-mile bumper sticker and put it
on your car.
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