Pay As You Go Coverage

What Does Pay As You Go Coverage Mean?

Pay-as-you-go coverage is an auto insurance policy where the premium is calculated based on the number of miles driven by the policyholder.

This concept also applies to workers’ compensation, allowing employers to make a significantly lower initial payment.

It is commonly referred to as usage-based insurance.

Insuranceopedia Explains Pay As You Go Coverage

Pay-as-you-go auto insurance charges premiums based on the insured’s mileage, meaning the more they drive, the higher their premium. Insurance companies track mileage using a telematics device installed in the insured’s vehicle.

For workers’ compensation, pay-as-you-go coverage involves a lower initial premium compared to traditional plans, which typically require 25% of the employee’s annual income upfront. The remaining payments are distributed throughout the year.

This payment structure offers cash savings for employees; however, it is not yet available in all states.