Pay As You Drive Insurance

Introduction

Say Ramesh and Suresh brought the same car model at the same price at the same time. Ramesh regularly travels long distances for work and vacations. Suresh uses his car when public transport is unavailable because he isn’t very fond of driving. Ramesh and Suresh own comprehensive car insurance plans and the insurer charges similar premiums to the both of them, despite Ramesh using his car around 4 times more than Suresh and thereby, being more exposed to damage than Suresh.

Pay As You Drive (PAYD) Car Insurance is here to change the game. If you don’t use your car very often, you can pay a variable premium based on usage and not a flat premium rate per year.

PAYD was introduced to the Indian market in 2020, after various insurance companies proposed it under IRDAI’s regulatory sandbox. Currently, only a few insurance companies offer these plans.

Let’s have a look at what Pay As You Drive Insurance is and how it works.

What Do You Mean By Pay As You Drive Insurance?

Pay as you drive insurance or usage-based motor insurance is a type of car insurance where you pay the own-damage premium based on the distance covered by your car. Thus, the premium is determined by the usage of your car.

This policy offers a mandatory third-party cover and a comprehensive cover.

  • Third Party Cover

    It provides coverage against damages incurred to another person or property involving your vehicle.

  • Comprehensive Cover

    It provides a much broader coverage by protecting you against own-damages as well as damages incurred to another person or property.

How Does Pay As You Drive Insurance Work?

Unlike a standard comprehensive policy, a pay-as-you-drive policy has a different process. Let’s take a look at the steps involved -

  • Selecting The Kilometre Slab

    The insurance premiums are primarily based on the number of kilometres driven and your driving habits. The insurance company will ask you to pick a kilometre slab for the year and the premium will be adjusted accordingly. So, the less you drive, the less you pay!

    The slab values may vary across insurance companies. For instance, Bajaj Allianz asks you to enter your current odometer reading and select a slab. Their slab value ranges from 3000 km - 15,000 km for a year. The premiums will be decided based on the slab you choose.

  • Installing A Tracking Device

    The insurance company will then ask you to install a telematic device in your car. This helps them track the distance you drive, how well you drive, the speed, and the remaining kilometres.

    If you reach your slab limit, you can top it up or refill it. This process may differ from insurer to insurer.

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Features Of Pay As You Drive Insurance

  • It Is Customisable

    You can customise your plan based on your car usage, i.e., you can select the kilometre slab according to how much you drive. If you’re someone who drives occasionally, you can select a lower slab and pay a lower premium.

  • Low Premiums

    Compared to a standard comprehensive car policy, PAYD policies cost much less - since the premium calculation is based on car usage.

    Comprehensive policies do not take into account the distance covered and you are required to pay a standard premium.

    When it comes to PAYD policies, you pay a premium based on the distance travelled by your car.

  • Kilometre Slab Refilling

    You can also top-up your chosen slab if it is exhausted or is about to be exhausted. So, your policy will be tailored to your needs.

  • Add-Ons

    Add-ons are optional benefits that you can purchase with your policy to enhance coverage. Add-ons available with a standard comprehensive policy are also included with PAYD policies.

  • Tracking With Telematics

    With the help of the tracking device, both you and the insurer can track the kilometres you have driven and your driving behaviour.

Pros Of Pay As You Drive Car Insurance

  • Low Cost

    The premiums will be lower than comprehensive plans since the rate is decided based on the car's usage.

  • Performance Tracking

    Both you and the insurer can keep track of the kilometres driven, driving behaviour, and remaining kilometres. For instance, you can track the kilometres driven and refill the slab as and when the limit is exhausted.

Cons Of Pay As You Drive Car Insurance

  • Invasion Of Privacy

    Your telematics device shall record every minute detail including the distance covered, location, and your driving habits. This invasion of privacy may be perceived as a negative aspect.

  • Not A Good Option For People Who Drive A Lot

    Pay as you drive insurance charges you based on the distance you drive. When you travel frequently and use your car more often, your insurance premiums will increase because you cover more distance. In such cases, you can compare the rates with the comprehensive plan and then decide whether or not to purchase it.

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General Insurance

How to Buy Pay As You Drive Insurance?

PAYD insurance is a new concept in India and not all insurance companies offer it. You can visit the insurer's website to check its availability.

Although the buying procedure may vary from insurer to insurer, the following is a general guideline.

You need to visit the website of the insurance company and enter the details of your vehicle.

As soon as the vehicle details are entered, you will be directed to a page displaying various types of plans, such as a comprehensive plan, a standalone own damage plan, a third party only plan, and a pay as you drive plan.

Upon selecting the pay as you drive plan, you have to select a slab from the insurance company's list.

You can also opt for any add-ons, depending on your needs.

Once this is done, the premium will be calculated and shown - according to the details you’ve put in and the coverage you have selected.

You need to pay the premium amount. After the payment is made, the policy will be sent to your registered email address.

The insurance company will also share details about the installation of the telematics device.

Important: A few insurers will require a vehicle inspection before proceeding to the payment step. For instance, Go Digit sends a link to you before you make the payment, through which you need to share a video of your car for the pre-inspection process.Important: A few insurers will require a vehicle inspection before proceeding to the payment step. For instance, Go Digit sends a link to you before you make the payment, through which you need to share a video of your car for the pre-inspection process.Important: A few insurers will require a vehicle inspection before proceeding to the payment step. For instance, Go Digit sends a link to you before you make the payment, through which you need to share a video of your car for the pre-inspection process.

Comparison Between A Comprehensive Policy And Pay As You Drive

Parameters Comprehensive Plan Pay as you drive Plan
Definition A comprehensive plan is a standard plan that provides both own damages as well as third-party coverage. Pay as you drive is a usage-based plan launched recently.
Premium The premium is determined based on -

Make and model of the car.

Cubic Capacity

Place of registration, etc.

The premium depends on the kilometre slab selected for that particular year. If the usage of the car is less, then the premium will be lower.
Usage limit There is no usage limit in a comprehensive policy, so you can drive the car for as long as the policy expires. The usage is limited to the kilometre slab selected. You will need to refill the slab if the limit is exhausted.
Add-ons Available Available
Claim Claims can be made for both own damage and third party within the policy period as per the terms and conditions of the policy. Own damage claims can be made according to the terms and conditions of the policy within the validity period of the selected slab. You can file a third-party claim as long as your third party coverage is valid.

Who Should Buy Pay As You Drive Insurance?

Since the premium is based on the usage of the car, this plan is suitable if –

You rarely drive.

You own multiple cars but aren't likely to use all of them.

You primarily travel by public transportation.

Summing Up!

Pay as you drive insurance makes sense if you don't use your car often and rarely take it out of your garage. You can customise your policy by selecting a suitable slab based on your car's usage. There is no doubt that it will reduce your insurance premium, but you should be comfortable with the thought that the insurer will have 24x7 data on your car’s movement.

exclusion of health insurance plans

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