As a type of comprehensive car insurance, pay-as-you-drive determines the premium cost based on the time the four-wheeler is driven. Using a gadget, the car's usage is tracked by keeping an eye on its overall travel distance. A usage-based auto insurance policy, which is being tested as a one-year trial project by the Insurance Regulatory and Development Authority of India (IRDAI).
To meet the car insurance needs of both new and current policyholders, the governing body and insurance providers work together. It is relatively new in India, but other nations have extensively studied the pay as you drive (PAYD) concept.
How Does Pay as You Drive Auto Insurance Work?
Pay as you drive car insurance is a type of policy. The ability to customise insurance policies helps policyholders reduce their premiums. Developed nations already have such policies, and India is catching up with the trend.
Third-party Four-wheeler Insurance
The importance of insuring a vehicle in India cannot be overstated. If you fail to follow the rules, you may be penalised. You must have at least third-party car insurance to ensure your vehicle is covered. An insurance policy like this covers damages caused to third parties by the insured vehicle.
Comprehensive Auto Insurance
The second option you have is a comprehensive car insurance plan. This policy covers a wide range of motor vehicle risks. In addition to covering own damage, the policy also offers third-party coverage.
As a result, financial losses are protected if the insured car is damaged. The causes of such damage are calamities, fire, vandalism, etc. The policy also covers theft.
The mandatory third-party liability cover is included in a Pay As You Drive car insurance policy. Comprehensive coverage is also available but is based on the distance travelled.
Therefore, you pay premiums based on your driving distance. There is, however, no effect on the mandatory policy's premium due to the distance. Therefore, if you drive less, your car insurance costs will be lower.
Pay-As-You-Drive Automobile Insurance Benefits
How it works is as follows:
- To begin, you must indicate the total kilometres driven by the four-wheeler during a one-year car insurance period. There are various use slabs offered by car insurance companies, which vary from one to another. The mileage coverage options provided by Bharti AXA, for instance, range from 2500 to 7500 kilometres.
- At no cost to you, the vehicular insurance company will install a telematics device on your four-wheeler.
- You can also purchase add-ons for your automobile insurance policy to increase your coverage.
- Auto insurance policies and add-ons are priced according to the usage tier.
- An account must be kept of the remaining kilometres in the account in addition to the distance the four-wheeler has travelled, the driver's driving habits, and the distance travelled by the driver.
- When the money in the account runs out, you can contact the car insurance company to reload it. Depending on your policy, you can do this throughout or after the plan's duration.
- Your damaged car insurance premiums will also be reduced with pay-as-you-drive insurance. Depending on the car insurance, savings of 5% to 25% might be possible.
Pay As You Drive Insurance: How Does It Work?
There is a slight difference between a regular car insurance policy and the pay as you go policy. Below are the details of the pay-as-you-drive car insurance plan:
- To determine the coverage you will need for the policy period of one year, you must first declare your car's usage based on the total kilometres your vehicle will cover. There is a fixed number of kilometres per year of 15,000 km. You are eligible for this plan if you drive less than 150,00 km per year.
- Before your policy expires, you must upload a video declaring your car's odometer reading to qualify for this plan.
- Telematics is not part of this plan since the declaration is based on the customer's agreement, and no telematics device is installed.
- As a member of this plan, you will be eligible to receive a 10% discount on your damage insurance premium once you become eligible.
- When the claim falls within the specified limit, which is 15,000 kilometres, the claim will be settled as usual. Co-payments may be required, however, if the amount exceeds this limit.
Pay as You Drive Car Insurance: Who Should Buy it?
It varies from person to person how they use their cars. It may be used frequently by some, while not by others. Because car owners have different driving behaviours, "pay as you drive" car insurance has been tailored to meet the needs of the following customers:
- For seasonal or less frequent drivers, this solution is ideal.
- Multi-car owners who do not use all their cars equally will benefit from this plan.
- People who commute primarily by public transportation and rarely use their vehicles will benefit from this plan.
- Pay-as-you-drive insurance may be appropriate when you travel out of the station a lot and cannot use your car extensively.
You should assess your financial situation, the usage of your four-wheeler, your insurance needs, the add-on options offered by the car insurance provider, and the terms, features, and costs specified in the paperwork before you purchase a pay-as-you-go car insurance policy.
Reading the materials attentively and considering your options can make the claims process more manageable.
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