Pay-as-you-go Insurance

The other main form of temp insurance is pay-as-you-go insurance, also known as month-to-month insurance. This type of cover is best for those who want to drive more than 28 days, but less than the full year of annual policies. This could be for many reasons, though the typical example is the university student who goes without a car during term, but who needs to drive whilst on holiday. Other drivers might need cover only seasonally or for other irregular periods. These drivers are not well-served by the classic year-round policy, so they may choose a month-to-month policy instead.

Month-to-month cover is managed online, with websites allowing drivers to make changes or cancel their policies completely. Typically, policies automatically renew at the end of each month, charging one's credit or debit card for the next month until the driver cancels the policy, so long as he or she gives proper notice. They often also charge a monthly administrative fee, perhaps £7.50 in addition to the monthly premium. Duplicate documents may also cost additional fees.

Benefits of Pay-as-you-go

Pay-as-you-go offers a notable benefit in that it allows drivers to build up a no claims bonus; temporary cover does not. In this way, drivers can accrue time accident-free, toward the goal of attaining a no claims bonus. Some even have a no claims bonus accelerator whereby drivers get a one year bonus after 8 months without an accident. After 5 years, the no claims discount may be guaranteed for life. Obviously this is the ideal - and it's hardly temp - but it's an example of what pay-as-you-go can offer, in addition to the necessary cover. Another benefit is the ability to put multiple cars and multiple drivers on such month-to-month policies. Some insurers allow policyholders to list up to four named drivers - provided the insurer accept all four - and four cars on their policy documents. This is in contrast to temporary cover, which insures one car and perhaps two drivers.

Young Drivers and Pay-as-you-go

One significant benefit offered by pay-as-you-go insurance is the ability to cover young drivers. Due to their risk characteristics, drivers between ages 17 and 21 often find it impossible to get temporary cover or prohibitively expensive to get any kind of annual cover. This is not indicative of insurers being unfair; statistics bear out the riskiness of this age group. They show that 1 in 5 young drivers will have an accident in the first year of driving. Yet despite that, young drivers do still need cover. One of their few options is month-to-month cover. For young drivers who need temporary cover, they can choose to purchase a month-to-month policy and then cancel after the first month. It's unfortunate if this is simply to cover a few days' use of another car, but better than driving without.