Should You Choose Pay as You Drive Option for Your Car Insurance?

Should You Choose Pay as You Drive Option for Your Car Insurance?

Motor insurance is mandatory, basis the Motors Vehicle Act, 1988. However, if you own a car but do not use it frequently, paying a significant premium amount for a car insurance plan may feel like an unnecessary expense.  A pay-as-you-drive (PAYD) car insurance plan might be your solution if you want to save money on your car insurance. This type of motor insurance charges you based on how much you drive your car. The less you drive, the less you pay. To make this work, the insurance company installs a device in your car that tracks your mileage and reports it back to them. This way, you only pay for the amount you drive. A pay-as-you-drive car insurance plan is a good option if you don’t use your car often and want to save on insurance.

How Does Pay as You Drive Car Insurance Work?

Pay-as-you-drive car insurance plan charges you based on how much you actually drive your car. Here’s how it works:

  • First, the insurance company installs a device in your car that tracks your mileage. This device is usually a small GPS or telematics device plugged into your car’s OBD-II port. It can also track other data, such as your driving habits and time.
  • Once the device is installed, the insurance company collects the data to calculate your premium. The less you drive, the lower your premium will be. The risk of getting into an accident is lower if you drive less.
  • Let us say you sign up for a pay-as-you-drive car insurance plan, and the insurance company sets your premium rate at Rs 5 per km. If you drive 10,000 km annually, your annual premium would be Rs 50,000. But if you only drive 5,000 km annually, your premium would be Rs 25,000. The device installed in your car would track the number of km you drive. This data would be used to calculate your premium.
  • The device also collects data on your driving habits, such as how hard you brake, accelerate, and drive. This data can be used to adjust your premium even further. For example, if you are a safe driver who doesn’t speed or brake hard, your premium may be lower than someone who drives aggressively.

Key Features and Benefits of Pay as You Drive for Car Insurance Plan

Here are some of the benefits you can enjoy with this type of car insurance:

  • Low premium: A pay-as-you-drive motor insurance plan is designed to charge you based on your actual car usage. As a result, if you don’t drive very often, you can enjoy a much lower premium than you would with a traditional car insurance policy.
  • Free telematics devices: Most pay-as-you-drive car insurance plans require installing a telematics device in your car. This device tracks your driving habits and sends the data to the insurance company. The good news is that most insurance companies offer these devices for free, so you don’t have to worry about additional costs.
  • Third-party coverage: Like comprehensive car insurance, pay-as-you-drive car insurance plans also offer third-party coverage, which means you will be covered for damages caused to other people and their property in case of an accident.
  • Floater coverage for multiple cars: If you have multiple cars, pay-as-you-drive motor insurance policies offer floater coverage, meaning you can insure all your cars under a single policy. It can help you save money and simplify the insurance process.
  • Heavy discounts: Pay-as-you-drive car insurance plan often comes with heavy discounts, especially if you’re a safe driver. Insurance companies reward safe driving habits by offering lower premiums and discounts on your policy.
  • Customisable coverage: Pay-as-you-drive car policies are highly customisable, so you can choose the coverage that suits your needs. For example, you can choose a policy with low mileage limits if you don’t drive often. Or, if you’re a safe driver, you can opt for a policy that rewards safe driving habits.

Key Differences Between Pay as You Drive and a Comprehensive Car Insurance Plan

The table below highlights the key differences between a pay-as-you-drive and a comprehensive car insurance plan.

Parameters Pay as You Drive Comprehensive Car Insurance Plan
Coverage Limited coverage based on mileage Extensive coverage for all risks
Premiums Premiums based on mileage Premiums based on vehicle value
Driving habits Encourages safe and responsible driving No direct influence on driving habits
Claims process Limited coverage may result in lower claims Comprehensive coverage may result in higher claims
Discounts Offers discounts for low mileage Offers discounts for various factors such as low-risk profile, safety features, etc.
Cost-effectiveness Cost-effective for low-mileage drivers Cost-effective for high-value vehicles and drivers who want extensive coverage
Risk coverage Limited coverage for accidents and theft Extensive coverage for accidents, theft, natural disasters, and other risks
Customisation Limited customisation options Offers various customisation options based on needs and preferences
Requirements Requires installation of a mileage tracker No specific requirements
Flexibility Offers flexibility to adjust premiums based on driving habits Limited flexibility to adjust premiums based on vehicle value and coverage type


Who & Why Should You Opt for Pay as You Drive Car Insurance Plan?

In conclusion, opting for a pay-as-you-drive car insurance plan might be your best choice if you don’t drive frequently or for long distances. It allows you to pay for the coverage you need based on the miles you drive, making it a cost-efficient option for those who don’t use their car as much.

Moreover, if you are a safe driver who doesn’t frequently speed or brake harshly, you can benefit from the discounts that pay-as-you-drive plans offer. PAYD motor insurance encourages safe driving habits and rewards drivers less likely to get into accidents.

In addition, a PAYD car insurance plan usually comes with the same coverage options as comprehensive car insurance plans, so you won’t have to compromise on the level of protection you receive. You’ll still be covered in case of an accident or theft, and you also get add-ons like roadside assistance or rental car coverage if you need them.

Finally, pay-as-you-drive motor insurance plans can be a great option for environmentally conscious people. Be sure to compare plans from different providers and choose one that fits your needs and budget.

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