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Benefits of Pay As You Drive Insurance

As per the provisions of the Motor Vehicles Act, car insurance is compulsory in India. But if one does not drive his/her car much or owns more than one car, it can become a financial burden. If you're wondering about a solution, read on to know more.

  • 17 Apr 2023
  • 2 min read
  • 1001 views

As per the provisions of the Motor Vehicles Act, car insurance is compulsory in India. But if one does not drive his/her car much or owns more than one car, it can become a financial burden. If you're wondering about a solution, read on to know more.

To avoid paying hefty insurance premiums in such situations, you can avail of pay as you drive car insurance. This innovative policy has gained popularity, which we will explore in detail in this article. We will explain how pay as you drive car insurance works, its features, inclusions, and exclusions. We will also look into tips to lower the premium with pay as you drive car insurance. By the end of this article, we hope to provide a comprehensive understanding of pay as you drive car insurance and its benefits to help our readers make an informed decision regarding this policy.

What is Pay as You Drive Car Insurance?

This implies “usage-based” car insurance. It allows one to pay for insurance based on the distance a person drives and how frequently he/she uses the vehicle, rather than a flat fee. This means that those who drive their cars less pay a lesser amount as a premium, which can be beneficial for those who do not use their cars frequently. It is also known as pay as you go car insurance or pay per mile car insurance.

In India, the Insurance Regulatory and Development Authority of India (IRDAI) has allowed insurers to introduce tech-enabled concepts, including pay as you drive car insurance. One of the key advantages of PAYD car insurance is that it benefits those who do not use their car frequently. For instance, people who work from home, use public transport, or have multiple vehicles may not need to use their car frequently, resulting in lower premiums for them. PAYD car insurance can also benefit those who drive safely and follow traffic rules, as they can avail of discounts on their insurance premiums.

In addition, PAYD car insurance can encourage responsible driving behaviour as drivers become more aware of their driving habits and strive to drive more safely and cautiously. This benefits the driver and other road users, making roads safer for everyone.

Overall, pay per mile car insurance is a useful innovation in the world of car insurance that can provide benefits for both drivers and insurers. It provides a fairer way of determining premiums and encourages responsible driving habits, making it a win-win for everyone involved.

How Does Pay as You Drive Car Insurance Work?

Pay as you go car insurance is an excellent policy for individuals who don’t frequently drive or have low mileage, as it allows them to save money on their car insurance premiums. Although this policy provides the necessary third-party liability coverage for the duration of the plan and also covers own damage, the coverage is dependent on the distance travelled.

The premium for pay per mile car insurance is calculated based on the number of kilometres driven by the driver. If a person drives the car for less than 15,000 km in the relevant year, the insured is eligible for the PAYD policy. The number of miles or kilometres travelled is determined through odometer readings declared by the insured.

Those eligible for a pay as you drive car insurance plan can also avail of a discount of up to 10% on their “own-damage” insurance premium. The claim settlement process for the PAYD plan is similar to any other car insurance policy.

Overall, pay as you go car insurance is an excellent option for those who do not frequently use their vehicles. It is important to note that if the insured exceeds the specified mileage limit, the person may have to pay an additional premium. Therefore, it is essential to calculate the estimated mileage beforehand to avoid any surprises in the future.

Features of the Pay As You Drive Car Insurance Policy

The PAYD policy is a significant instrument for those who do not drive much or own more than one car. This type of plan helps these people save significantly on their insurance premiums. The notable features of the PAYD insurance plan are:

  • The premium payable is calculated based on the distance the insured car travels. Hence, the policyholder only pays for the distance he/she drives, making it an ideal option for those who drive occasionally.
  • Odometer readings determine the number of kilometres travelled; this is usually declared by the insured.
  • Under such a policy, insurers offer a discount on the premium on the frequency of the vehicle's usage and how many miles the car has travelled.
  • PAYD policyholders can customise their policies according to their driving habits and preferences.
  • Since PAYD is usage-based, it is cost-effective compared to traditional car insurance policies.
  • This policy provides coverage for your own damage and also third-party liability coverage.
  • PAYD insurance policies promote eco-friendly driving by encouraging drivers to drive less, which helps reduce carbon emissions.

PAYD policies offer a valuable alternative to traditional car insurance plans. The customisable features of PAYD policies provide a flexible and cost-effective solution for those who want to pay a premium based on their actual usage.

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Inclusions of Pay As You Drive Insurance Policy

The pay as you go car insurance policy covers the same risks as traditional car insurance policies but with a different payment structure that allows drivers to pay only for the miles they drive. Here are the inclusions of PAYD car insurance policies:

  • Accidents: In the event of an accident, the policy will cover the cost of repairing or replacing the car, as well as any medical bills that may arise as a result of the accident.
  • Theft: PAYD car insurance policies also cover theft or damage caused due to the theft of the car. If the car is stolen or damaged in a theft-related incident, the policy will cover the cost of repairs or replacement.
  • Natural Disasters: PAYD car insurance policies cover damages caused by natural disasters like floods, earthquakes, or hurricanes, including the cost of repairing or replacing the car.
  • Third-party Liability: These policies provide coverage for third-party liability. In the event that you are at fault in an accident, the policy will cover the cost of any damages or injuries caused to the other party.
  • Personal injury protection: Some PAYD policies include personal injury protection as well as coverage for other accident-related expenses.

Hence, the policies cover the same risks as traditional car insurance policies but with a payment structure that is more suited to the needs of modern drivers.

Exclusions of Pay As You Drive Car Insurance Policy

Like all insurance policies, PAYD car insurance policies have certain exclusions that policyholders need to be aware of. These exclusions are:

  • Intentional Damage: The insurer will not cover any damages caused intentionally by the policyholder. 
  • Driving Under the Influence of Drugs/Alcohol: These policies do not cover damages caused while driving under the influence of drugs or alcohol. The objective of this standard exclusion in all car insurance policies aims to discourage reckless driving. 
  • Driving the Car without a Valid Driving License: PAYD car insurance policies do not cover damages caused while driving the car without a valid driving license. 
  • Depreciation of the vehicle due to regular wear and tear: This is not covered because regular wear and tear is a natural process that occurs over time and is not considered an accident or damage. 
  • Damage due to Electrical or Mechanical Failure: PAYD car insurance policies do not cover damages due to electrical or mechanical failure. These are considered maintenance issues, and insurers will not cover these issues.

It is essential to understand the exclusions of a PAYD car insurance policy before purchasing it. Policyholders should carefully read the terms and conditions of the policy to ensure that they are aware of what is covered and what isn’t. This will help them avoid any surprises in the event of an accident or damage to their cars.

Tips to Lower the Premium with PAYD Insurance

Since pay as you drive car insurance is a type of auto insurance that bases its premium on how much and how safely a driver drives, here are some tips that policyholders can follow to lower their premium with PAYD insurance:

  • Drive Less: The less you drive, the lower your premium will be. If possible, try to carpool or use public transportation to reduce the number of miles you drive.
  • Drive Safely: Safe driving habits like obeying traffic rules and driving within the speed limit can help lower your premium. Avoid aggressive driving, sudden braking, and other risky behaviours that can increase your likelihood of getting into an accident.
  • Choose a Car with Safety Features: Cars with safety features like airbags and anti-lock braking systems can help lower your premium.
  • Do Not Drink and Drive: Drinking and driving are dangerous and can increase your insurance premium.
  • Follow Defensive Driving Techniques: Defensive driving techniques can help reduce your risk of getting into an accident. These techniques include scanning the road ahead, maintaining a safe distance from other vehicles, and being aware of your surroundings.

Policyholders can reduce their insurance premiums and become safer drivers by following these tips. It's essential to remember that pay as you drive car insurance encourages safe and responsible driving habits, which can benefit everyone on the road.

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