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Have Auto Insurance, but Drive Little? Company May Offer Pay-As-You-Drive Insurance

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Photo by aalorber via LAist Featured Photos on Flickr

Photo by aalorber via LAist Featured Photos on Flickr
In a move that could get people finding alternative ways to commute, state legislation (.pdf) approved last year enabled auto insurance companies in California to offer discounted rates for drivers who don't use their vehicles that much. Now, State Farm is the first company trying to take advantage it.

"It's just common sense that Californians who choose to drive less should have an option to pay less for auto insurance," said Insurance Commissioner Steve Poizner, who is also running for Governor. "The voluntary pay-as-you-drive initiative is a cutting-edge program that will allow insurers to offer these plans without compromising consumer privacy. I hope other insurers follow suit and join State Farm in offering this product."

If State Farm's plan is approved, insurance rates would depend on the actual mileage instead of estimated mileage, according to Poizner. Customers would starting seeing rates reduced when driving 500 miles less per year. Methods to verify mileage include having insurance agents, mechanics or smog check facilities record the data. A "technological device" can also be used to track mileage.

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But what happens if you happen to drive more than you usually do (say, a random road trip)? Will you end up paying more than ever? That's yet to be seen, but the option of traditional auto insurance as we know it is not going away.