Blog Pay-As-You-Go Insurance In Canada

Nov 29, 2024

Pay-As-You-Go Insurance Is Benefitting Drivers In Canada

illustration of a car with odometer

Pay-as-you-go insurance is not a new concept, but it has become newly available to drivers in some Canadian provinces from CAA. The CAA MyPace program was introduced to the Ontario auto insurance market in 2018.

In this blog, we will explain the concept of pay-as-you-go and answer common questions about the costs, how it works, who it’s for and its role in the future of automobile coverage.

Three key takeaways about pay-as-you-go coverage for your car:

  • Pay-as-you-go insurance bases your payments on how much you drive, not on annual or temporary policies.
  • This type of coverage has a base rate plus premiums paid every 1,000 kilometers driven, with notifications sent when nearing that threshold.
  • In Canada, pay-as-you-go policies are currently available only in Ontario, New Brunswick, and Nova Scotia; telematics programs offering discounts remain available elsewhere.

What’s on this page

What is pay-as-you-go insurance?
How does pay-as-you-go insurance work?
How much does pay-as-you-go insurance cost?
What you need to know about CAA pay-as-you-go insurance
Where is pay-as-you-go insurance available in Canada?
Who is pay-as-you-go insurance for?
Is pay-as-you-go different from pay as you drive?
How to get the best rate for pay-as-you-go insurance
Pay-as-you-go insurance for cars FAQs

What is pay-as-you-go insurance?

Pay-as-you-go is a type of usage-based insurance where you pay the amount based on how much you drive rather than pay an annually or buy temporary insurance. It originated in the UK and has since been adopted in the US and Canada.

Rather than paying monthly, pay-as-you-go monitors how much you drive and you pay for coverage based on how many kilometres you drive. Drivers are rewarded for driving less.

If you drive 1,000 km in a year, you could save up to 70%. But, once you begin to drive 8,000 km, the savings decrease to around 5%. Know that once you hit 9,000 km of driving, you no longer save any money.

How does pay-as-you-go insurance work?

Pay-as-you-go works similarly to other usage-based insurance products. Drivers are required to plug a device into their vehicle. This device connects to a web portal or app to track driving distance. The app records how many kilometres are driven, the time and the trip distance. It is based on driving distance only, not other driving data.

It will also cover you with accident benefits, third party liability, DCPD and uninsured motorist. Like other basic policies, you can add collision and comprehensive for an extra cost.

Generally, policies will charge you automatically for the next 1,000 km when you hit 950 km. If you do not use the entire 1,000 km, it will be carried over to the next billing period. The more you drive with pay-as-you-go savings will begin to decrease.

How much does pay-as-you-go insurance cost?

Pay-as-you-go costs will vary based on how much you drive. All drivers have a base rate when they sign up for the program. You pay your premiums every time you drive 1,000 kilometres.

Drivers are provided with a notification each time they get close to the 1,000-kilometre threshold. Payments are automatically withdrawn from your account. The system is very similar to a pay-as-you-go cell phone plan.

For example, a person who drives 5,000 kilometres in a year would pay less than a driver who drives 7,000 kilometres annually. Unlike other usage-based products, you will not receive a discount to sign up. The discount is built into a premium as you are rewarded for driving less.

What you need to know about CAA pay-as-you-go insurance

The CAA MyPace pay-as-you-insurance program gives you the freedom to pay for only the distance you need. You can decide when you need more or less coverage, and how quickly you use it. If you have a lifestyle that includes less driving, this can be a great reward. You'll be able to reduce costs without changing your driving habits. It has been reported that if you drive 5,000 kilometres, you could save up to 30% with the program.

Here's how it works:

  • Enroll in the program and pay the base rate plus your first 1,000 km
  • Install the device in your car
  • Download the smartphone app to monitor usage
  • Start driving
You can enroll by contacting your insurer to see if they offer the program.

Don't drive much? Compare rates for pay-as-you-go coverage.

Get big savings if you only drive a little. Consider usage-based insurance coverage. Compare quotes today!

Summer beach trip in car

Where is pay-as-you-go insurance available in Canada?

Pay-as-you-go in Canada is only available in four provinces: Ontario, New Brunswick, and Nova Scotia. Other provinces don't have it because it has not been approved by provincial regulators. If an insurer offers telematics to track kilometres, you are still allowed to use them and be rewarded with discounts, just not on a pay-as-you-go basis.

Who is pay-as-you-go insurance for?

Pay-as-you-go is designed for people who drive less. You can benefit and save from this program if you don't drive a lot. However, if you drive over 9,000 kilometres annually, your costs would be similar to a more traditional policy.

There are a variety of situations where mileage-based policies make sense for drivers, including :

  • Those who work from home or take public transit to work.
  • A family with several cars can pay a full annual premium on a commuting vehicle and restrict others to occasional driving.
  • Urban drivers who only use their vehicles for trips to a cottage or vacation property, or occasional shopping trips.
  • Seniors or retired persons who do not commute to a workplace but need their vehicle for errands and trips.

Is pay-as-you-go different from pay as you drive?

It is different from pay-as-you-drive (PAYD) because it only takes kilometres driven into consideration. PAYD also measures driving behaviours such as speed, time of day you drive, braking and acceleration and rewards drivers for safe driving practices.

How to get the best rate for pay-as-you-go insurance

The key to getting the best rate for it, is to determine how much you drive. If you drive daily, this is probably not your best product.

If you don’t drive a lot, speak with your advisor about obtaining this type of policy. Depending on your driving needs, other types of coverage may be better suited for your situation.


Pay-as-you-go insurance for cars FAQs

It can be if you drive less than 9,000 km per year. This type of car insurance was designed for people who drive infrequently; therefore the less you drive, the more you can save.

It can last as long as you want to be part of the program. Once you go over 9,000 annually, you will lose out on the discounts that are built in, so it is a good idea to calculate how many kilometres you drive yearly.

The rate you pay depends on how much you drive. Rates operate on a sliding scale. The less you drive, the more you will save.

New drivers have higher rates but pay-as-you-go for new drivers can help you cut down on costs. Speak with your advisor to see if you qualify.

No, pay-as-you-go motorcycle insurance is not currently available in Ontario.

Should you consider pay-as-you-go insurance?

If you do not drive a lot but own a vehicle, this could be a solution for you. As we watch the emergence of this new product on the market, look for pay-as-you-go options from your insurer. Until then, no matter how much you drive, you deserve affordable car insurance in Ontario.