Pay-as-you-drive insurance entered the Indian motor insurance market at the beginning of 2020. As a part of the IRDAl’s Sandbox project, numerous insurance companies have introduced the recently launched pay-as-you-drive vehicle insurance plans. (Source: The Indian Express) It is even hailed as one of the most affordable automobile insurance plans.
If you’re not sure how pay-as-you-drive car insurance differs from other insurance plans, keep reading the detailed article below.
What is a pay-as-you-drive or usage-based motor insurance policy?
Pay-as-you-drive insurance is a form of usage-based vehicle insurance in which premiums are determined on the basis of how often the vehicle is used. It is a comprehensive insurance plan, that guards your car against both third-party liabilities and own damages. However, but it levies premiums based on the overall kilometres covered by your four-wheeler. It is also referred to as pay-as-you-go insurance.
In order to qualify for pay-as-you-drive car insurance, car owners must disclose an estimate of how much they will or plan to use their vehicle during the policy period This estimate is based on the total number of kilometres they anticipate travelling. The premium will be determined by the approximate number of kilometres by the insurance provider. Therefore, if you don’t drive often, you can declare a lower kilometre cap, which will result in lower insurance premiums.
As a result, pay-as-you-drive insurance premiums are less expensive than standard car insurance premiums.
This insurance is offered in both individual and floater plans. Under the floater plan, an automobile owner can cover all of his or her vehicles under a single insurance policy with a varying kilometre restriction for each vehicle. This option is a perfect choice for those with access to more than one car.
Key features of pay as you drive (PAYD) insurance
This is a useful coverage option for people who do not drive frequently. It can help consumers save a significant amount of money on their car insurance premiums.
Check out some of the striking features of this plan to gain more insight:
- It provides a discount on the premium depending on how much the car is used and how many kilometres it travelled (less than 15,000 KM).
- Before the expiration of their current four-wheeler insurance policy, the policyholder needs to upload a video of their vehicle in order to attain the benefits of this plan.
- For people who drive occasionally or infrequently, this plan works effectively.
- A 10% discount on the policyholder’s own damage premium can be acquired under this policy.
How pay-as-you-drive insurance works
Pay-as-you-drive, a recently launched car insurance product, enables consumers to tailor their insurance coverage and thereby lower the premium.
The mandatory third-party liability coverage is provided by a PAYD motor insurance policy for the duration of the policy. Additionally, it provides own-damage coverage, although it is determined by the distance travelled.
As a result, you only pay the premium for the actual distance travelled by you. Now, let’s look at the working of pay as you drive insurance here:
- Declare your car usage: The kilometres the insured travels determines the PAYD policy’s premium. At the moment, the fixed kilometres are set at 15,000 km per year. Thus, if the insured has travelled less than 15,000 kilometres in a calendar year, they are eligible for this plan.
- The odometer reading: The odometer reading is a crucial element of the plan. Customers are obligated to disclose the reading on their car’s odometer. They can also start the procedure and start receiving the benefits of the plan by uploading a video even before the policy expires.
- Telematics is not necessary: Telematics is a tool used to monitor the distance driven by the vehicle of the insured and a number of other unidentified analytical features. Currently, the basis of this plan is the customer’s declaration of distance travelled. Hence, if you opt for this plan, no such gadget will be installed in your car to determine the distance travelled by it.
- Discounts on premiums: Once you qualify for the PAYD plan, you are eligible for a 10% discount on the cost of the premium on your own-damage insurance.
- Claim settlement procedure: If the claim falls within the allotted limit of 15,000 km, the claim settlement procedure is the same as it would be for any other plan. However, if the set limit is exceeded, you will be required to make a co-payment of the claim amount.
Pay as you drive car insurance is an ideal choice for whom?
A PAYD is a brand-new form of car insurance for Indians. The amount of the insurance premium that need to be paid depends on how far the car travels.
Moreover, it can be a great option for those who don’t drive often. This insurance plan is best suited for –
- For seasonal drivers
- For people who don’t use their cars much
- For individuals owning multiple vehicles who don’t use them all equally
- For people who wish to avoid taking public transportation during the monsoon.
Pay as you drive is a great option for those who don’t use their vehicles regularly. It will bestow you with comprehensive insurance coverage without putting a strain on your pocket. Hence, if you own multiple cars or don’t use your car often, pay-as-you-drive car insurance is ideal, as it will help you save money.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.