Pay As You Drive Insurance: Features & Benefits

The way one person uses their car may vary vastly from another. It is influenced by your overall lifestyle, what you do or don’t do, and a few other factors. Some may not drive their vehicle as frequently as commonly assumed, and some may utilise it above and beyond the average expectations. Keeping this in mind, the insurance industry is bringing about some changes that may help you save some money on your insurance policy. A new offering from the vehicle insurance sector allows you to pay for your insurance on the basis of how you use your car. This type of insurance is known as ‘pay as you drive insurance’. If you are looking to renew your car insurance or looking to buy a new one for the vehicle you have purchased, you can now consult your insurance provider about the pay as you drive insurance policy.

What is pay as you drive insurance?

This is a concept that has already been explored in a few other countries across the world. In India, this is the first time that this concept is being offered at such a scale. Slowly but surely, almost all major general insurance providers are offering this new form of vehicle insurance. Also referred to as the Switch On/Switch Off policy, this form of car insurance can prove useful for people who do not use their Car frequently. When you buy this cover, you do not get any concession on the premium you pay. As with older policies, the full premium has to be paid as a single amount, upfront, at the time of policy purchase. However, you can expect to save in the form of refunds on your own damage cover costs. You will be allowed to control your Own Damage cover through an app which will allow you to switch this cover on and off. For each day that your cover is turned off, i.e., when you are not driving your car, you may be able to earn a bonus day. Your percentage of concessions may depend on the number of bonus days you earn by switching off the own damage cover. For example, if you have switched off your policy for about 20 to 60 days during the year, you may earn about 15% concession on your premium. If the policy has been switched off for over 121 days, it may earn you 40% off. * Standard T&C Apply

Importance of Pay As You Drive Insurance

Under the Motor Vehicles Act, 1988, third-party insurance is mandatory in India. However, PAYD insurance is an excellent option for those who:

1. Drive their vehicles infrequently but want comprehensive damage coverage.
2. Wish to save on premiums by paying based on actual car usage.

PAYD insurance allows drivers to pay premiums proportional to their car usage. It also offers discounts on policy renewal for claim-free years.

How Does Pay As You Drive Insurance Work?

Pay As You Drive (PAYD) insurance differs from traditional car insurance by calculating premiums based on your car usage. Here’s how it works:

1. Declare Car Usage

You need to estimate and declare the number of kilometers you plan to drive during the policy term, typically one year.

2. Odometer Reading Submission

To activate the policy, you must upload a video of your car’s odometer reading as proof before the policy begins.

3. No Telematics Device

Currently, PAYD policies are based on self-declaration by the car owner. No telematics devices are installed to track mileage.

4. Premium Discount

If eligible, you can receive a discount on the own damage component of your insurance premium.

5. Claims and Limits

Claims within the declared kilometer limit are processed as usual. However, if the limit is exceeded, you may need to pay a portion of the claim as co-payment.

Pay as your drive plan features

Here are a few key features of the pay as your drive insurance that you need to know about, especially if you are planning to buy this policy. 1. This is a new type of policy. The way it is designed, makes it suitable for people who do not drive their cars as frequently. 2. It can help you save on the premiums for your comprehensive car insurance Your premium will depend on how much you use your vehicle and how much you need to plan to cover it. 3. Unlike some regular vehicle insurance covers that can offer to cover your vehicle for three years, pay as you drive cover is only available for a period of one year, i.e., you have to renew this plan annually. * Standard T&C Apply While this is not the norm yet, the insurer may require you to fix a telematics device in your car if you are opting for the policy. This is a device that tracks the kilometres travelled by your car. Since the plan works on the basis of the distance travelled, such a device may help keep track of the same. However, the plan is currently based on the declaration of the policyholder rather than tracking via telematics device.

Benefits of pay as you drive

The most attractive benefit of this policy is that it helps the policyholder save money on premiums, and thus, make the policy more affordable. If you do not use your car as frequently, and it sees a little off time, you can start saving on your vehicle insurance with this plan. Before you can buy such a policy, it is ideal to get an estimate of the premium you will be required to pay for it. For these policies, you will be required to pay an annual premium, as that is the duration of these policies. If you have a car and want an estimate for a pay as you drive cover, you can use a car insurance calculator for the plan of your choice.

Who Should Buy Pay As You Drive Insurance?

PAYD insurance is ideal for specific groups of car owners:

1. Infrequent Drivers: For those who rarely use their vehicles, such as seasonal drivers.
2. Multiple Car Owners: Ideal for individuals with multiple cars who don’t drive each one regularly.
3. Public Transport Users: Perfect for those who primarily rely on public transport and seldom drive their personal car.
4. Frequent Travelers: Suitable for individuals often out of town who use their car sparingly.

How to Buy Pay As You Drive Insurance

Follow these steps to purchase PAYD insurance through Policybazaar:

1. Visit the Car Insurance section on the homepage.
2. Enter your car registration number to view insurance quotes.
3. Fill in car details such as model, variant, RTO, and registration year.
4. Provide your name, email, and mobile number.
5. Enter the policy expiry date and claim details of your current policy.
6. Review available PAYD plans and select your desired kilometer limit.
7. Upload a photo of your car’s odometer.
8. Log in to the app with your registered mobile number to complete the upload.
9. Pay the discounted premium online to finalize your purchase.

Things to Consider Before Purchasing PAYD Insurance

1. Multiple Car Ownership

If you own multiple vehicles, choose PAYD insurance for the car that’s used the least, typically driven under 10,000–15,000 kilometers per year.

2. Vehicle Usage

This policy is ideal for those who drive less than 15,000 kilometers annually, rely on public transport, or frequently travel outstation and rarely use their car.

The Evolution of PAYD Insurance

The PAYD concept is relatively new in India. In January 2020, the Insurance Regulatory and Development Authority of India (IRDAI) approved PAYD under the Regulatory Sandbox initiative. Since then, several insurers have introduced usage-based motor insurance, offering a flexible and cost-effective option for low-mileage drivers. * Standard T&C Apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.