Pay As You Go Coverage

Published: | Updated: June 30, 2017

Definition - What does Pay As You Go Coverage mean?

Pay as you go coverage is an auto insurance policy that charges a premium based on the miles driven by the policyholder.

It is also applicable to workers' compensation, where it allows employees to make a much lower initial payment.

It is also known as usage-based insurance.

Insuranceopedia explains Pay As You Go Coverage

Pay as you go coverage for auto insurance charges the insured based on their mileage, meaning that their insurance premium will climb the more they drive. Insurance companies monitor the distance the insured drives through a telematic device installed in their vehicle.

As for pay as you go workers' compensation, it involves charging a lower initial premium compared to the standard plan, which asks for 25% of the employee's annual income. The rest of the payments are spread throughout the working year.

This payment structure provides the employee with cash savings; however, not all states currently provide it.

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