The right insurance products can ease your financial worries during unexpected events, but high policy premiums can be a concern. Talking about car insurance, the Motor Vehicles Act (1988) makes it mandatory for car owners to cover their vehicles under an insurance product. However, for those who travel occasionally and rarely use their cars, high bike or car insurance premiums can be an added financial burden. To address this issue, the IRDAI has advised insurance companies to offer Pay As You Drive insurance for both four-wheelers and two-wheelers. Let's explore how Pay As You Drive insurance works.
How Pay As You Drive Insurance Works?
Pay as You Drive (PAYD) insurance works differently from a regular car insurance policy. It calculates policy premiums based on the vehicle's usage or the running of the vehicle. In simple words, it means you must pay premiums only for the number of kilometres you drive the insured vehicle.
The following are the features of this insurance product -
Pre-determined slabs:
PAYD car insurance policy has predetermined slabs of 2500 km, 5000 km, and 7500 km. Thus, when buying this insurance product, you can select a suitable slab and pay premiums accordingly. The higher the slab you choose, the higher will be the premium amount.
Affordable premiums:
The option to choose policy coverage based on vehicle usage makes this insurance product more affordable. For instance, if you own a car but use it rarely, you can choose a lower kilometre slab. This way, the premiums won’t hurt your pocket.
Flexibility:
If you think you may exceed the chosen distance slab, top up your PAYD insurance policy with a suitable kilometre slab for continuous coverage.
Telematics device:
Some insurance companies may ask policyholders to install a telematics device in their vehicles to track the kilometres.
Policy tenure:
The policy tenure is one year. However, it may vary from insurer to insurer.
Conclusion
To sum up, if you use your vehicle less frequently, choosing a Pay As You Drive car insurance policy can reduce your premium liabilities. Also, if you own multiple vehicles, you can choose this coverage for the vehicle that is least used. It is important to note that policy premiums will also depend on various factors, such as the type of policy you choose, the vehicle you own, its age, and any additional riders. Hence, take some time to understand all terms and conditions and make a well-informed decision.