Pay as You Drive Car Insurance
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Introduction
The standard comprehensive car insurance plan covers a wide variety of risk factors. Car owners can have peace of mind as the policy covers the risk of third-party liabilities, accidental damage, and theft. However, there are certain limitations to these regular insurance coverage plans.
A basic plan offers similar coverage for every person and does not take into account your unique situation or requirements. No matter how well you drive or how little you drive, you do not enjoy any concession in premiums.
In this regard, the ‘pay as you drive insurance’ is a revolutionary concept in motor insurance. You can now get enhanced insurance coverage and save a significant sum on your annual premiums.
What is the Pay as You Drive Car Insurance?
The ‘pay as you drive car insurance’ is a type of add-on cover in car insurance where you pay premiums depending on your usage of the vehicle. The car insurance premium is calculated based on how much you drive and how well you drive your car. This policy is also known as ‘pay per mile car insurance’ or ‘drive less pay less car insurance’. The policyholder pays lower premiums on the ‘own damage component’ of car insurance.
The risk of accidents or mishaps is correspondingly lower if you drive less and drive well. The pay as you drive motor insurance results in lower insurance premiums for such people. Otherwise, all car owners are forced to pay a flat fee irrespective of their usage.
How Does the Pay as You Drive Car Insurance Work?
Choosing Kilometer Slabs
You can select different kilometre slabs based on your average usage. Typically, these slabs are divided into - less than 3,000 km, 3,001 to 5,000 km, and more than 5,000 km range.
Calculation of Premium
The insurance premium shall be determined based on your chosen kilometre slab. The higher the slab, the higher the insurance premium.
Installation of a Telematics Device
After choosing a kilometre slab and paying the premium, you have to install a small telematics device in your car. This device tracks your vehicle usage to obtain information related to distance, speed, time of driving, braking patterns, etc.
Smartphone App Connection
The telematics device installed in the car has to be connected to a particular app on your phone. This enables you to access real-time data related to your car driving. This also helps to avoid any discrepancy between you and the insurer about the car’s usage. Further, the information helps improve your driving habits, too.
What Happens If You Exceed the Driving Limit?
The right selection of kilometre slabs is a critical step in pay as you drive car insurance. However, there is a possibility that some drivers may exceed the chosen limit. The insurer instantly obtains this information through the telematics application and contacts you regarding the same.
Now, you can either top up your existing plan (for the extra distance) or shift to a different plan with a higher limit if you have not filed any claim during the period. The insurer shall fix the new premium on a pro-rata basis.
Note: The premium adjustments required after exceeding the driving limit apply only to the ‘own damage component’ of car insurance. The premium payable for third-party liability insurance remains unaffected due to these changes.
Pay As You Drive Insurance Eligibility
Regular Cars
The coverage is usually not provided to luxury or high-end cars that are expensive. The price limit for the vehicle may vary from one insurer to another.
Annual Usage
Policyholders are required to provide an estimate of how many kilometres they would drive in a year. Certain insurers do not issue the policy if the usage is below a pre-determined limit.
Ownership Transfer
Insurance providers also take cognizance of ownership transfer cases while issuing the policy.
Previous Claims
A few insurers do not accept requests from policyholders who have filed car insurance claims in the previous year.
What is Covered in the Pay as You Drive Car Insurance?
- Vehicle damage caused by road accidents
- Damage caused by fire or explosions
- Damage caused by natural and man-made calamities like floods, storms, riots, etc
- Theft and complete loss of the vehicle
What is Not Covered in the Pay as You Drive Car Insurance?
- Any damage caused if the car is driven without a valid driving license
- Any damage caused when the driver is under the influence of alcohol or drugs
- Regular wear and tear of the vehicle
- Damage caused due to electrical or mechanical failure of the vehicle
Features & Benefits of Pay as You Drive Motor Insurance
Features
Benefits
Lower Cost
Occasional drivers can benefit due to lower usage. They pay lower premiums compared to the standard car insurance plan.
Personalized Coverage
The insurance policy can be customized based on your estimated usage of the car in a year.
Comprehensive Coverage
Policyholders can enjoy all the benefits of a traditional policy with significant savings.
Flexibility
Policyholders can top-up their existing plans if they exceed the driving limit and ensure continuous coverage. They also pay lower premiums if they are not using the car regularly.
Difference Between Pay as You Drive and Comprehensive Car Insurance
Pay as You Drive Insurance
Comprehensive Car Insurance
Premium Calculation
Based on the distance covered by the car in a year
Premium Calculation
Based on factors like the car’s model, place of use, driver’s age & driving habits
Coverage
Comprehensive coverage with premiums based on actual usage
Coverage
Third-party claims, damage due to accidents, fire, and loss due to theft.
Cost of Premium
Value for money as the premium is lower for safe & occasional drivers.
Cost of Premium
Premium is fixed and maybe high as it is not based on the actual usage.
Flexibility
Highly flexible as the premium is based on your actual usage and driving habits
Flexibility
Limited flexibility as the premiums are fixed
Kilometer Limit
You have to choose a kilometre slab based on your estimated usage of the vehicle
Kilometer Limit
Not Applicable
Telematics
You have to install a telematics device to track the vehicle
Telematics
Not Applicable
Claims
Claims can be filed until you have not crossed the Km limit
Claims
Claims can be filed as long as the policy remains active
Frequently Asked Questions on RTI Car Insurance
The premium for a pay-as-you-drive car insurance policy is calculated based on your vehicle usage. Hence, it is best suited for (i) occasional drivers who don’t use their cars daily and (ii) experienced drivers with an excellent driving track record.
At the time of purchasing the policy, you have to declare the estimated distance that shall be covered by your car in the policy period. You are given different ranges of kilometre slabs to make a choice. The premium is calculated based on this slab
If you exceed the chosen distance limit, you can either top up your existing plan or buy another plan with a higher limit.
If you own multiple vehicles, it is advisable to purchase the pay-as-you-go car insurance policy for the vehicle that is least used among the lot. This ensures that you get the best savings on premiums.
