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What is pay-as-you-go insurance?

Looking to discount your auto insurance premium with telematics? Compare quotes from Canada's top UBI providers to find your lowest rate today.

Your insurance premiums are based on numerous factors: the type of car you drive, where you live, your driving record, and other elements. They all influence how much you pay for car insurance.

If you’re looking for ways to lower the cost of your car insurance, consider CAA’s new MyPace policy. CAA MyPace is a pay-as-you-drive insurance policy that provides coverage based on your car’s use. Let’s take a closer look at what this policy offers and how it differs from other telematics or usage-based (UBI) insurance.

Insure as you drive

Pay as you go car insurance bases your insurance premium on the total distance you drive your car.  After you sign up for the MyPace program, you will receive a device that you plug into your car’s onboard diagnostics system (OBD-II). This needs to be done within 48 hours of your policy start date, or from when you receive the device.  Once the device is installed, log on to the online portal either on your computer or via CAA’s MyPace App, then you’re ready to start driving and keeping track of the distance travelled. Take note that the CAA MyPace policy is not available for motorcycles at this time.

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Distance-based costs

Presently, CAA pay-as-you-go insurance is only available for car insurance in Ontario, Nova Scotia, New Brunswick, and PEI. There are two components of the policy: the base fare and a charge for every 1,000 kilometres. 

The base fare is determined by standard factors such as the type of car you drive and your driving history. I called CAA to get my estimate and it was $385. The sales representative told me it can range from $350-$900 depending on the standard factors. 

The next cost is your “per 1,000-kilometre” cost which the agent quoted me at  $138. Again, this cost is determined by many compounding factors. 

Currently, I pay about $2,100 for car insurance per year for 15,000 kilometres. CAA MyPace is meant to only go to 12,000 kilometres anything more and you’ll basically just be paying their standard insurance fees.

How CAA MyPace works

CAA MyPace works like any standard insurance policy with accident benefits, third-party liability, DCPD, and uninsured motorist. You can also add collision and comprehensive just like any car insurance policy. The difference is in measuring your kilometres in 1,000-kilometre increments. 

Once you hit 950 kilometres, your policy will automatically be charged for the next 1,000 kilometres. Don’t worry you’ll receive notice once you’ve driven 750 and 900 kilometres, ensuring that you’re forewarned of the automatic addition.

If you don’t use the entire 1,000 kilometres during a billing period, the remaining kilometres will be carried over for you into your next billing period. That means when the new term starts, you can simply continue to drive without having to think about paying for additional kilometres.

Your savings decrease the more kilometres you put on. If you only drive 1,000 kilometres in a year, you could save up to 70% with pay-as-you-use insurance. If you drive 8,000 kilometres, the savings decrease to around 5%. Know that once you hit 12,000 kilometres of driving, you no longer save any money with this as-you-drive insurance. So, if you believe that you will be travelling more than 12,000 kilometres, you’re probably better off with traditional car insurance and seeing what other types of benefits and discounts are available to you.

Did you know: you can opt-out of CAA MyPace insurance at any time. If you find yourself approaching the 12,000-kilometre mark, consider changing to a different type of policy.

Pay as you go versus other usage-based insurance

CAA MyPace’s premiums are based on a core insurance rate combined with the distance that you travel.  Other usage-based insurance (UBI) also charges a core rate, but the additional cost is determined by your driving habits.

Telematics, or UBI, looks at factors such as when and the distance you drive, as well as your speed and braking and accelerating habits. This information is used to create a profile of you as a driver, determining how “safe” you are on the roads. 

If you frequently have a speed that is marked as over-the-limit and have a short braking distance, you could expect to pay higher premiums than an individual that maintains the speed limit and has a greater braking distance. Your insurer determines the savings you will receive on your policy based on the data collected by UBI technologies.  The safer the driver you are, the greater the savings you’ll experience. 

Be aware: Recent changes to UBI policy in Ontario means there could be additional charges for bad driving habits.

Which policy is right for you?

Both CAA MyPace and usage-based insurance monitor your driving behaviour and adjust your premiums based on the results.  If you’re a casual driver and only use your car to get to the grocery store and gym, then MyPace would be a great option for you. Since you’ll only be paying for the amount you actually drive, you can anticipate significant savings on your insurance premiums. 

If you’re a frequent driver and use your car for work, another usage-based insurance policy could be your best option.  Since these policies adjust costs according to your driving behaviour, you’ll receive discounts according to when, where, and how you drive.

Did you know: A hidden benefit of a UBI is that it can result in individuals being more conscious of their driving behaviour.  It’s a positive feedback cycle, where the very awareness of having the device in your car results in you being a safer driver, resulting in cheaper car insurance premiums. Similarly, a hidden benefit of MyPace is that you could find yourself driving less to save money on your car insurance policy.

The bottom line

User-based insurance is a great way to both save money on your insurance premiums and to improve your driving habits.  Do you presently use CAA MyPace or another UBI? How has affected your car insurance premiums and driving habits?  Let us know in the comments below.