Pay-as-you-go car insurance and is it CHEAPER than normal cover? Your questions answered

The Sun

19-05-2025

DRIVERS are increasingly taking out pay-as-you-go style car insurance - but how does it work and is it worth it financially?
Temporary car insurance policies let you insure a vehicle for a shorter period of time - and their use is on the rise.
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A host of temporary car insurance providers have seen sales spike since 2020.
GoShorty said it saw a 50% increase in take up of these types of policies between 2023 and 2024.
Cuvva said it saw a rise of 30% on average year-on-year for the last five years and Veygo by Admiral a 28% hike between 2023 and 2024.
Meanwhile, price comparison site GoCompare also found the number of searches for temporary car insurance on its website soared by 262% between March 2021 and March 2025.
Drivers will often share vehicles with friends or family and just pay for insurance on a pay as you go basis.
Tom Banks, car insurance spokesperson for GoCompare, said: "There are a number of factors which could be contributing to this rise - typically people take out temporary car insurance policies when they are buying or selling a car, taking one for a test drive, or borrowing a vehicle from a family member or friends.
"In recent years, the cost of living crisis has also played a role, with car-sharing among friends or family members a popular way to save money while still having access to a car."
But how exactly does temporary car insurance work and is it always the best option?
Here, we take you through everything you need to know.
What is temporary car insurance?
Temporary car insurance, also known as short-term car insurance, offers you short-term cover for driving your vehicle or someone else's.
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You can buy policies covering you for as little as an hour, while some will cover you for up to a month. Some will cover you for longer.
A host of insurers offer temporary cover including Cuvva, Day Insure by Aviva and Tempcover.
You set the length of your cover on a temporary car insurance policy when you take it out.
Once it expires, you won't be able to legally drive the vehicle on a public road.
However, most insurers will let you extend the length of the policy for a fee.
Temporary car insurance policies usually offer you fully comprehensive cover, which means your car and yourself are protected, as well as other drivers' and their vehicle in case of an accident.
However, some only cover you for third party, fire and theft while others offer just third party protection.
Third party protection is the legal minimum level of of car insurance cover required.
It covers any damage you cause to someone else, their car or property but not yourself or your own vehicle.
How much you pay for a temporary car insurance policy depends on the same variables that apply when buying all car insurance, like your age, occupation and where you live.
Temporary car insurance typically won't cover you to drive a hired or rented vehicle either.
What are the pros and cons?
The obvious pro to temporary car insurance is that it gives you cover for a smaller period of time and you don't have to pay for an annual policy.
This is ideal if you need to borrow someone's car for the weekend or are looking to go away on a short road trip.
However, there are some cons that come with them, says Iwan Doherty, senior researcher at Fairer Finance, starting with cost.
He said: "A two-week trip can often cost 25% of an annual premium, depending on the driver, so affordability over a long period is a major disadvantage."
Two other pitfalls to these types of car insurance are cover limits and excesses.
A cover limit is the maximum monetary sum the insurer will pay out for a claim.
The excess is the amount you agree to pay out of your own money towards the cost of a claim.
Iwan added: "Short-term car insurance won't provide features like a courtesy car, and a significant proportion of the market offers no personal accident cover or cover for stolen or lost keys.
"An annual policy will provide more cover.
"Short-term policies have high excesses, so in the event of a crash, you will pay a significant amount of money out of your pocket.
"£500 is a standard excess for short-term policies, though it varies in both directions."
Put simply, short-term car insurance is worthwhile for one-off uses of a vehicle over a short period.
How does temporary car insurance compare to an annual policy?
We analysed how much someone would pay for a month's cover through a temporary car insurance policy compared to the monthly cost if paying for a standard policy annually.
We used the same car registration and personal details including job title and address, with an excess of £250, when applying for quotes.
We received a quote from the temporary car insurance arm of a major insurer, for 30 days coverage, of £245.
Meanwhile, a week's worth of temporary car insurance cover was £84 - or £336 a month.
However, an annual quote from the same firm, for the most basic level of cover was £426 - £35.50 a month.
Of course, the differences in cost you will pay for temporary compared to annual cover will vary.
But, the analysis shows you will likely have to fork out much more if you're taking out temporary cover multiple times throughout the year as opposed to taking out an annual policy.
What are the alternatives?
Pay-per-mile policies are one option - these charge based on the actual number of miles you drive.
They will only really be worth your time if you're likely to keep mileage down though.
Iwan explained: "For sharing a car with your partner or housemate across the year, pay-as-you-go insurance is probably not the best option.
"The market average premium for a policy with two drivers is only around £200 higher than the average premium for those with one driver, according to Consumer Intelligence, meaning even limited usage across multiple periods will be cheaper by adding a 2nd driver to an existing car insurance policy."
What is car insurance?
Consumer Reporter Sam Walker reveals all you need to know about the basics...
Car insurance pays out if your vehicle is stolen, damaged, catches on fire or is involved in an accident.
As a minimum, it protects you against any damage you case to other road users, the public or their property - these are called third parties.
You only need to claim on your car insurance when an accident is your fault.
If another motorist is to blame, their insurance should pay out instead.
Car insurance, unlike home insurance, is a legal requirement and if you don't have it you can be fined up to £1,000.
You can also have your vehicle seized and destroyed.
However, you don't need to insure your car if it is classed as "off-road", or holds a statutory off road notification (SORN).
The vehicle has to be kept on private land and not a public highway though.