Many people drive rarely enough that traditional auto insurance can seem needlessly expensive. For example, if you live in a city and use public transportation much of the time, you are far less likely to be in an automobile accident because you are not driving and therefore should be able to pay a reduced insurance premium. Luckily, there is a low cost insurance option for people who do not drive a car or other vehicle on a regular basis: pay-as-you-drive, or usage based insurance.

How does a usage based insurance work? The automobile insurance company will evaluate the person applying for insurance for risk as they usually do, collecting information such as the applicant’s age, driving record, and the type of car that he or she owns. However, the insurance company will also adjust the rates according to the amount that the car is driven. There are a variety of ways to collect the driver’s actual number of miles driven.

The average auto insurance premium is based on the average amount of driving. If you drive substantially less than the average person, you deserve to pay less money. For a person who does not drive very often, usage based insurance can be a great deal and lead to a huge savings in premium costs. However, many companies still don’t offer this type of insurance. Luckily for people who drive very little, the idea is catching on. In many states, at least one insurance company offers usage based auto insurance. In even more states, there are insurance companies that offer people who don’t drive often a substantial discount.

Studies have found that a national switch to usage based auto insurance would lead to a decrease in driving along with a decrease in fuel usage. For this reason, many environmental groups support this type of auto insurance. Usage based insurance would not only encourage people to use public transportation more often; it would also allow people to have more control over this aspect of their budget. Not only could we cut back on gas bills as needed, we could cut back on insurance. This added control may just make pay-as-you-drive insurance one of the more popular insurance options of the future.