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Quick Guide to Understand Pay As You Drive Car Insurance Policy

By Vikas Chandra Das
21 July 2022, 11:46 AM
pay as you drive car insurance

You know that feeling when you just want to jump in your car and drive with no destination and see where the road takes you? The freedom to follow your heart with no GPS is exciting, isn’t it? And who does not love long drives? But in India, apart from a valid driving license, The Motor Vehicles Act of 1988 mandates every car owner should have a valid Third Party Liability before hitting the road. Some owners prefer to have a Comprehensive Cover for 360-degree coverage. Apart from these two types of insurance policies, a ‘Pay As You Drive’ Insurance policy was recently released. 

If you are a newbie in the world of motor insurance, hold tight! We are going to tell you everything you need to know about ‘Pay as you Drive’ -

What is ‘Pay as You Drive’ Car Insurance?

‘Pay as you Drive’ is a one-of-its-kind unique use-based model of motor insurance. Therefore, your premium amount is decided by your usage. More the kilometres travelled, the higher would be the premium amount and vice versa. A remote software will be used to track your vehicle use and the data collected will help your insurance provider determine the premium amount. 

Features of ‘Pay as you Drive’:

  1. Flexible Programs: Just like the name suggests, a ‘Pay as you Drive’ car insurance plan calculates your premium based on the distance you have traveled. There are three distance slabs pre-defined at the time of buying the policy. These slabs are - 2,500 Km., 5,000 Km and 7,500 Km. Before buying, you will need to share the present readings of your car’s odometer with your insurance provider. Once you choose your desired distance slab, the premium of your policy will be estimated.
  2. Premium Services: Apart from easy customization, this plan offers you additional services like a daily allowance, depreciation reimbursement, and no-claim bonus protection.

How is the Premium Calculated? 

Usage (in Kilometres): Depending on the use, there are three slabs that are fixed by IRDAI. These include - 2,500 Km, 5,000 Km and 7,500 Km. The premium is fixed based on the package selected. 

PRO-TIP: The Premium Amount for ‘Pay as you Drive’ is usually 20% less than the standard cover.

Telematics Device Data: A telematics device is installed in your car to capture all the necessary data related to location and kilometre consumption. This recorded data is shared with the owner through a smart-phone based application. This data is also saved in a repository maintained and regulated by IRDAI.

Driver’s Skill: Driving habits can be useful in making predictions about the likelihood of a claim. Since the data of the driver is available through the telematic deceive, it has an impact on the premium amount. Drivers with a good driving history usually have lower premiums while reckless drivers end up paying more. 

Who Should Get ‘Pay as you Drive’? 

The ‘Pay as you Drive’ model focuses on reducing the premium amount for those with little to no usage. The ‘Pay as you Drive’ model is best-suited for –

  • Those who depend on public modes of transport:

If you only use your car during the weekend or once in a while, we would recommend a ‘Pay as you Drive’ insurance plan for you. Since your kilometres will be limited, you can save money by opting for a plan according to your need. Just like Raman, who generally uses a local train to reach his office daily in order to save time and avoid traffic congestion. But once in a while, he uses his car to reach the office and because the usage of his car is less, he has opted for pay-as-you-drive car insurance. With this car insurance policy, he only has to pay for the kilometers being used hence more savings for him. 

  • Those who have more than one car: 

With more than one car, the distance travelled (in kilometres) will be divided among all the other cars. Having a ‘Pay as you Drive’ policy for all your cars will ensure you are only paying for what you use.

How to Buy ‘Pay as You Drive’ Car Insurance Plans? 

You can buy a ‘Pay as you Drive’ car insurance policy online within minutes. Here are the steps: 

  1. Visit your insurer’s website and choose the ‘Pay as you Drive’ insurance policy in motor insurance.
  2. Enter your basic details like name, age, contact number along with your car’s make-model-variant, registration location, and vehicle number.
  3. Select the Annual Kilometer Usage based on your preference.
  4. You can also invest in an add-on cover to widen the scope of coverage.
  5. Once you have submitted all your details along with your Annual Kilometer usage estimate, your premium amount will be calculated.
  6. Pay the premium amount using a safe banking system such as net banking, credit or debit card, or digital wallet. Once your payment is successful, you will receive your policy copy on your registered email ID.

Answers to Your Pay as you Drive Car Insurance Queries 

1. How to change Comprehensive Insurance to Pay as you Drive policy?

Currently, only five insurers - Edelweiss General Insurance, ICICI Lombard General Insurance, TATA AIG General Insurance, Bharti Axa General Insurance, and Bajaj Allianz General Insurance are offering the ‘pay-as-you-drive’ car insurance. If your Comprehensive Policy has been issued by one of the above, you can contact them directly via the toll-free number and let them know about your decision. You will then be guided further by the customer support agent. 

2. What happens to the No-claim bonus when you change a car insurance policy to pay-as-you-drive?

A key feature of the No-claim bonus (NCB) is that it is associated with the driver and not the vehicle or policy type. Therefore, you can retain your NCB under 'pay-as-you-drive' insurance.  At the time of renewal, if you switch to another insurer or change your coverage plan, you can also transfer your NCB.

3. What happens to Add-on covers if you change your car insurance policy to a pay-as-you-drive plan?

The ‘pay-as-you-drive’ insurance policy is a combination of both Own Damage (OD) as well as the Third Party (TP) Cover. Add-on covers are supplementary products that widen the scope of coverage. Therefore, any Add-ons that you select along with your ‘pay-as-you-drive’ insurance policy will have the same terms and conditions.


A car insurance plan is mandatory according to the law for all car owners. However, before buying a policy, it is important to analyze the type of coverage you need. Those who do not frequently use their car can opt for the ‘Pay as you Drive’ plan. But it is important to completely understand the terms of the plan. Make sure you read the fine print before finalizing your insurer. Comparing different plans online will help you get the best value for your money.

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