Having a hard time understanding the ins and outs of how the insurance companies decide on the price of your car insurance policy? Here is a slant that you may not have considered. If at year end, your insurer sees that you haven't been driving too much over the course of the year, they will reduce the cost of your insurance and get a price break.

As a matter of fact this has been an insurer mainstay for a long time - the low mileage bonus that they can arrive at either by inquiring of you how much you have driven from day to day, or primarily by looking at how long you've had the car and how much you've driven. Another method of calculation is more accurate and delivers more to you. What the insurance companies are planning is that they're going to calculate your premium completely on a per-mile basis.

A usage based car insurance policy is more forgiving if you drive less. And in some places, it goes by the name of PAYD (pay as you drive). What they do is, they turn your car into some kind of a taxicab; they put in a not very conspicuous meter on your car that will keep track of the miles driven each year.

Companies like Texas' Progressive for instance, have been offering Texans a car insurance policy based on the meter called MyRate, for more than ten years now. Now that the trial has worked out, they're offering it all over the country over this year. Actually, a clutch of states around the South like Alabama, Georgia and Louisiana, and several up North like Michigan, Maryland Oregon already have this option.

How this works is that when you sign up, a PAYD installer places a device in you car to records information. Usually, it finds its home on the underside of the steering column on your car, and it collects more than just how many miles you drive. Pretty often, it records information about your driving style, and how often you use your car. The device uses a wireless connection to the company - where they put your driving information together with other traditional factors that affect your insurance, what your age is, your sex and your driving record, to set up a custom car insurance policy just for you. If you're someone who doesn't drive much at all, you could actually shave half off your traditional insurance premium. Get better rates by comparing car insurance premiums today.

On the other hand they find out that you constantly drive near the top of the speed limit, and you drive a lot in the middle of the night when they know that the statistics say most accidents occur, you'll pay more - about ten percent. This device likely tell them what areas of town you are driving in, so that they can tell if your chosen area is high risk or low risk. It will even know if you are in a hurry one morning, and really stepped on the gas for about 5 seconds to quickly get to 40 mph in just 3 seconds - and man, will you pay. Get ahead of the curve and compare: cheap car insurance right now.

Most car insurance policy majors are trying out a version of the PAYD scheme now with volunteers and their own unique hardware - Allstate, State Farm, The Hartford - the entire lot. This will function to aid people to keep a perspective on their driving behavior, and cut out wasteful miles. And parents can get a clue as to what their kids driving habits are like, as well.