Know About Pay As You Drive and How You Drive Insurance
IRDAI is constantly trying to make car insurance accessible and affordable to all.
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What is Pay As You Drive Insurance?
Pay As You Drive (PAYD) insurance is a perfect solution for occasional drivers looking for car insurance. It is also referred to as 'Pay As You Go' or 'Pay As You Use' car insurance. PAYD insurance is a flexible car insurance policy that allows owners to pay the premium based on the distance (kms) travelled annually and their driving behaviour.
Under the PAYD insurance plan, the car insurance premium is calculated based on how many kilometres you cover in a policy year instead of a fixed price. PAYD is an affordable option for those who don't drive frequently, have more than one car or prefer responsible driving habits.
How Does Pay As You Drive Insurance Work?
Pay as You Drive insurance is slightly different from regular car insurance not in terms of coverage, but in terms of premium calculation. Under the PAYD car insurance, you have the option to save on premiums by paying only for the total number of kilometres you opt to drive in a policy year as per your requirements, usage, and driving habits. The following points highlight how does a PAYD insurance works:
- Once you buy a Pay As You Drive insurance with a plan of driving only a specified number of kilometres in a year, you need to provide your insurer with the odometer reading.
- PAYD insurance offers coverage only if your car is still within the chosen driving limit. For example, if you opt for driving 5,000 km in a year but at the time of the claim, the kms are exceeded, the insurer is not liable to settle or pay for the damages.
- If you are about to exceed the allotted driving limit, you can always top up your coverage.
Any claims that are made under the PAYD insurance are processed as usual only if your vehicle stays within the kilometre range you opted for while the insurance. In case you do not exceed the driving limit, some insurers allow you to carry forward the unused distance (kms) to the next policy year, whereas certain also offer a discount while renewing the policy.
Benefits of Pay As You Drive Car Insurance
PAYD insurance is a highly beneficial plan for those who drive their cars occasionally. It can help you save a good amount on your car insurance premium. Let us check some advantages of the Pay As You Go car insurance below:
- Significant Savings: Being a tailored usage-based policy, the PAYD insurance premium is much lower than a standard car insurance policy since you only pay based on kilometres you choose. Hence, if you drive less, you pay less and save more. The PAYD insurance plan offers a comprehensive coverage at a reasonable cost if you drive within the chosen range and do not exceed the decided limit.
- Flexibility: Being a customised car insurance policy, PAYD insurance enables you to adjust your plan based on your driving style and habits. While buying pay as you drive insurance, you can choose the number of kilometres that suit your requirements and top up with more in case you have exhausted the limit. The plan is flexible and offers you to pay as per the distance you choose to cover. In case you exceed it, you can get a top up, whereas if you drive less, insurers will either let you carry it forward or offer you some sort of discounts while renewing your car insurance policy.
- No Telematics: Pay as you go insurance is currently based on the declaration of kilometres by the policyholder, and no telematics device is needed to be installed in the insured vehicle to track the readings. Hence, it does not involve any extra cost but rather saves money.
Is Pay As You Drive Car Insurance Suitable For You?
While the PAYD insurance is a lucrative and affordable option, it may not be suitable for every car owner. You can read some points below to understand who will benefit the most from a pay as you drive car insurance:
- Those Owning Multiple Cars: Individuals who own several cars and are unable to drive them all in equal measure can opt for the PAYD car insurance based on how much they drive a particular car.
- Occasional and Seasonal Drivers: Car owners who do not drive their car on a daily basis or are occasional drivers can buy a pay as you drive car insurance plan as they take their car out on the roads less than people driving it daily.
- Public Transport Commuters: If you are someone who prefers using public transport like a bus, cab, metro, etc for daily commute instead of your own car, you can also choose the PAYD insurance plans since you will drive your car frequently.
Conclusion
Pay as you drive insurance is a smart and cost-effective option for individuals who don't drive often or have multiple cars. By paying as per your annual usage, policyholders can save enormous amounts on their insurance premiums while maintaining the essential coverage. As a car owner, it is crucial to understand your driving behaviour & pattern, based on which you can select the type of policy that fits your coverage requirements.
