Paying high auto insurance premiums even though you haven’t used your car much?
Car insurance is important not just because it is a legal mandate but also for your protection. What if you could customise your premium while driving?
To meet people’s changing insurance demands, insurers are developing innovations like pay-as-you-drive car insurance add-on covers. These are excellent choices for low-mileage and infrequent drivers and allow you to pay solely for the kilometres you drive, making them a cost-effective insurance alternative. Wondering whether you should go for the pay-as-you-drive insurance add-on? Keep scrolling for a comprehensive insight and make an informed decision.
What is the Concept of Pay-As-You-Drive Insurance?
Regular online car insurance plans often feature a fixed premium that must be paid regardless of whether you drive your vehicle. Pay As You Drive (PAYD) insurance enables you to pay premiums based on how often you drive.
Insurers employ odometer readings or the car’s built-in telematic systems to track distance driven to determine pay-as-you-drive car insurance premiums. So, if you drive less frequently, you’ll pay less for insurance.
Simply put, the pay-as-you-drive car insurance add-on allows you to pay lesser premiums. It lets you report the number of kilometres you will travel in a year and pay a premium based on that total.
What is Covered Under Pay As You Drive Car Insurance?
This policy gives third-party cover and comprehensive cover, which are as follows:
- Third-Party Cover: It protects against damages caused to another person or property by your car.
- Comprehensive Coverage: It provides significantly greater coverage by providing financial compensation against both damages to you and your vehicle and to third-party individuals or property.
What is Not Covered Under Pay as You Drive Car Insurance?
- Accidental damage to the insured car was caused after exceeding the available kilometre limit.
- Alteration or tampering with the odometer reading.
- Harm or loss caused by a war or nuclear assault.
- Loss or damage caused by one’s negligence.
- Damage or loss resulting from a traffic infringement.
- Damage or loss resulting from illegal use of the vehicle.
- Claims filed outside of the policy period.
- Driving under the influence of alcohol or any drugs.
- Driving without a valid license.
Additionally, the policy does not cover the steady loss in vehicle value caused by regular wear and tear from ordinary use.
How Does the Pay-As-You-Drive Insurance Policy Work?
The number of kilometres driven and your driving behaviour are the primary factors influencing insurance premiums. The insurance company will ask you to choose a kilometre slab for the year, and your rate will be modified appropriately.
Depending on your insurer, they may break it down differently per kilometre, for example, 5000 kilometres, 7500 kilometres, etc. Your automobile should not have exceeded this limit when making the claim. The insurer will also install a telematics machine in your car. It enables them to monitor distance, how well you drive, your speed, and the remaining kilometres under the policy.
What to Do If You Exceed the PAYD Kilometre Limit?
If you exceed the chosen limit of your pay-as-you-drive car insurance policy, you can buy more kilometres within the existing policy period. However, this approach may vary among insurers.
This insurance coverage can cost you 10 and 25% less than the traditional vehicle insurance plans. But, to claim under such policies, the vehicle must be within the chosen kilometre limit. Otherwise, it will lead to claim rejection.
Benefits of Pay As You Drive Insurance
- Low Premium Costs: Less expensive than getting standard insurance policies, as the premium amount depends upon the chosen kilometre range. Thus, the less you drive, the lower the premiums, and vice versa.
- Policy Customisation: Pay-as-you-drive car insurance covers also allow you to opt for add-ons, allowing you to gain comprehensive coverage that aligns with your driving needs.
- Flexibility: This insurance plan offers a lot of flexibility to an individual. It is easy to change the required coverage as your driving habits evolve over the years. Besides, you can buy extra kilometres if you exceed your limit within the policy period.
- Get Discounts: If you drive less than the allotted kilometres, the insurer may offer you a discount at the time of policy renewal.
Free Setup of Telematics Device: Your car insurer will fit a telematics device into your car to track the kilometres. This helps you monitor your car usage and make decisions accordingly.
Disadvantages of Pay-As-You-Drive Insurance
- Invasion of Privacy: Your telematics device will capture it all, such as how much distance, where the vehicle was, and how the driver behaved.
- Not for People Who Drive a Lot: Pay-as-you-drive insurance charges based on the number of miles you cover. Thus, using your car for long-distance travel may not be feasible.
- Claiming Process: Proving distances driven together with the telemetry data could prove cumbersome when the claim is being made.
- Premium Calculation Issues: Because telematics devices or apps can influence policy and premium, problems with them may appear.
- Not Recharging the Slab Limit: If you forget to recharge the slab limit, you cannot file for your damage claim in case of an accident.
Who Can Choose PADY Insurance?
- Occasional drivers who only use their cars from time to time.
- People who own more than one car and do not drive them evenly.
- Public transport users who frequently use public transport and rarely drive their automobile
- Frequent travellers who frequently travel out of town and do not use their car much.
Pay-as-you-drive insurance will be a cost-effective option if you use your car relatively infrequently. However, remember that PAYD is available as an add-on to your standard vehicle insurance plan. So, its validity will depend upon your policy tenure. However, this can also vary based on the insurer and the policy you have chosen.
