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Pay As You Drive Car Insurance

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16 Sept 2021
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About Pay As You Drive Insurance

Pay as you drive insurance, is a comprehensive insurance plan wherein the premium rate depends on the usage of the vehicle. The car’s usage is monitored by using a device that keeps track of the total distance covered by the car. Launched recently, this usage-based policy was introduced by the Insurance Regulatory and Development Authority of India (IRDAI), and is currently running as a one-year pilot project.

Pay as you go car insurance, in comparison to conventional car insurance, is considered to be more cost-efficient since the premium is charged according to the number of kilometres driven.

How Does Pay As You Drive Car Insurance Cover Work?

This is a little different from typical car insurance. Here is how it works:

  • To begin with, the usage of the car (on the basis of total kilometres covered) for a 1 year policy period has to be declared. Insurance companies offer different usage slabs, which can vary from insurer to insurer. For example, Bharti AXA offers km coverage options of 2500, 5000 and 7500 kms.

  • A telematics device will then be installed in your vehicle by the insurer, free of cost.

  • You can also avail add-ons to extend the coverage

  • The premium charged depends on the usage slab and add-ons you have picked

  • The device keeps track of the distance covered, the driver’s driving habits and the remaining km balance

  • When the balance is exhausted, you can contact the insurer to recharge it. This can be done during or at the end of the plan tenure

Benefits of Pay As You Drive Car Insurance

There are many benefits that come with pay as you drive or pay per mile car insurance :

  • Low Premium
    The total distance travelled determines the premium amount, and the usage slabs are fairly low thus making premium amounts for pay as you drive much more affordable than regular insurance.

  • Telematics Device Installation For Free
    A free device is installed in your car to monitor the car’s usage, condition, distance covered, and the insured’s driving habits.

  • Customizable Coverage
    The policyholder can customize their insurance with the help of add-on covers, or shift usage slabs or convert back to their own damage cover when the usage balance is exhausted.

  • Discounted Premium
    Pay as you drive insurance also offers discounts on premiums on your own damage insurance. The discounts range from 5%-25% depending on the insurer.

Features of Pay As You Drive Car Insurance

Here are some notable features of pay as you drive car insurance:

  • Policy tenure duration is 1 year

  • Pilot project launched by the IRDAI

  • Affordable alternative to standard car insurance

  • Third-party premium is decided by IRDAI

  • Car usage (total kms covered) determines its own damage premium

Who Needs to Buy Pay as You Drive Insurance?

Car usage, needs and preferences vary from one person to another. The pay as you go car insurance is designed keeping that in mind. This type of insurance is a good fit for people who:

  • Do not drive their car/vehicle very often.

  • Use public transport most of the time.

  • Travel frequently, and do not use their car during that time.

  • Own multiple vehicles and do not use all of them in the same measure.

Procedure to Buy Pay as You Drive Insurance

Follow these steps to buy pay as you drive car insurance online:

  1. Go to the website of your chosen insurance provider, and head to the ‘buy car insurance’ page.

  2. Select pay as you drive or pay as you go car insurance

  3. Pick a usage slab depending on your car usage (annual basis)

  4. Enter the car’s odometer details and KYC information such as name, contact number, etc.

  5. Fill out the consent form

  6. Choose add-on covers, if you wish to

  7. Your premium will be calculated according to the chosen usage slab and displayed. Pay the amount online, and the insurance will be issued in your name

What Happens if the Car Usage Limit is Exhausted?

If the car usage limit is exhausted, it can be recharged on the policy expiration date or even during the policy tenure. Shifting to a higher usage slab is another option, as is switching to standard own damage insurance; provided that you haven’t made any claims. Note that the insured will have to pay the higher premium accordingly.

While the own damage cover will need to be renewed after expiry, your third party cover will remain active. Thus if the distance covered by the car exceeds the usage limit, own damage claims cannot be filed.

List of Companies That Offer Pay As You Drive Insurance

The IRDAI has given its approval to multiple motor insurance providers such as Go Digit Car insurance, Tata AIG Car Insurance and Bharti AXA Car Insurance. These companies have to sell a minimum of 10,000 pay as you go policies in a duration of six months in order to make it a regular car insurance offer. While companies like Bharti AXA are already offering this plan, not all providers have launched this plan yet.

Conclusion

As with regular car insurance, it is important to assess your financial condition, car usage, insurance needs, add-on options offered by the insurance company, clauses, features and charges mentioned in the documents before purchasing a pay as you go car insurance policy. Reading the documents carefully and analyzing your options will help the claim procedure go smoothly.

FAQs on Pay as you Drive Car Insurance

  • ✔️Who launched the pay as you drive car insurance policy in India?

    This usage-based policy was introduced by the Insurance Regulatory and Development Authority of India (IRDAI), and is currently running as a pilot project for a period of one year.

  • ✔️What are the Features of Pay as You Drive Insurance?

    Here are some notable features of pay as you drive car insurance:

    • Policy tenure is of 1 year

    • Part of IRDAI’s pilot sandbox project

    • Affordable alternative to regular car insurance

    • Third party premium is decided by IRDAI

    • Car usage (total km covered) determines own damage premium

  • ✔️Who needs to buy the pay as you drive insurance?

    Pay as you drive car insurance is a good fit for car owners or people who:

    • Do not drive their vehicle very often

    • Use public transport most of the time

    • Travel frequently, and do not use their car during that time

    • Own multiple vehicles and do not use all of them in the same measure

  • ✔️What happens if the car usage limit is exhausted?

    If the car usage limit is exhausted, it can be recharged on the policy expiration date or even during policy tenure. Moving to a higher usage slab is another option, as is switching to standard own damage insurance.

  • ✔️Which insurance companies in India are offering this policy?

    The IRDAI has given its approval to multiple motor insurance providers such as Go Digit Car insurance, Tata AIG Car Insurance and Bharti AXA Car Insurance for selling this policy.