How Pay As You Drive Car Insurance Helps to Save on Premium?

Car insurance is an associated cost when buying a car. The motor laws of the country mandate every car owner to possess third party insurance for his/ her car. As a result, you need to buy insurance for your car whether you prefer it or not. Although the best car insurance companies offer vast coverage at economical prices, it can still pinch you hard if you don’t use your car often.

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Thank your stars as pay as your drive car insurance is finally available in India. This newly-launched car insurance is known for being affordable, especially for people whose cars stay parked more than being driven.

Decoding Pay As You Drive Car Insurance

Pay as you drive car insurance is a type of four wheeler insurance policy that charges a premium based on the actual usage of the car instead of a run-of-the-mill annual policy. It is a usage-based policy that considers the total number of kilometres driven by the car to estimate the car insurance premium. In other words, cars that are not driven frequently will attract lower premiums under pay as you drive insurance as compared to vehicles that are constantly on the road. Thus, it is also known as pay as you use car insurance.

Lower premiums do not mean lesser coverage for cars under the pay as you drive car insurance. On the contrary, this usage-based insurance offers an all-inclusive comprehensive cover that includes both third party insurance as well as own damage cover. So whenever you do take your car out, pay as you drive will cover you against third party liabilities as well as any damages resulting out of the fire, natural disasters, accidents and manmade calamities. Moreover, it also covers your car against the risk of getting stolen while resting in the parking lot and offers personal accident cover for the owner-driver.

Unlike regular car insurance plans, pay as you drive car insurance does not consider the attributes of the car, such as its age, engine CC, make, model, etc, and its geographic location to estimate the premium amount. Instead, it considers the actual usage of the car and sometimes, the driver’s age, experience and driving habits to calculate the premium.

Some of the right car insurance companies offering pay as you drive plan also offer add-on covers, such as No Claim Bonus (NCB) protection, conveyance allowance, zero depreciation cover, etc. on payment of an additional premium.

How Does Pay As You Drive Car Insurance Work?

Under pay as you drive car insurance, you need to pre-declare the usage of your car while buying the policy. You will be required to declare the total number of kilometres that your car is likely to travel during the policy tenure, which is mostly of one year. For this purpose, motor insurance companies have created fixed kilometre slabs for car owners to choose from. You need to pick a kilometre slab that is the closest to the number of kilometres you expect to cover during the policy year. Your insurer will calculate your car insurance premium based on the slab you pick.

For example, suppose you expect to travel 3200 Km with your car in one year. So, you should choose a kilometre slab offered by your car insurer that is the closest to 3200 km. You can pick a kilometre slab of 3000 km or 3500 km, whichever is offered by your insurer.

Motor insurance providers understand that you can’t exactly predict the usage of your car. You may end up driving more than your slab limit or drive less than the chosen limit. The rule of thumb is to choose a lower slab which is closest to your expected kilometre usage while buying the pay as you drive insurance plan. This is because you have the option to top up your slab limit between the policy tenure in case you exhaust its balance.

On the other hand, choosing a slab way higher than the expected kilometre usage is not recommended. This is because you will be unable to carry forward the remaining kilometre balance to your car insurance policy after renewal and it will get wasted. Considering the example discussed above, you should pick the 2500 Km slab and top-up the slab limit upon exhaustion in case your insurer offers a slab of 2500 Km and 5000 Km while your usage is 3200 Km.

How Pay As You Drive Car Insurance Helps to Save on Premium?

Pay as you drive car insurance is mostly categorized as an affordable policy. As compared to regular car insurance plans, pay as you drive policy can be purchased for a lower premium amount. Take a look at how pay as you drive insurance helps to save on car insurance premiums:

• Pay Premium As Per the Usage of Your Car

  Generally, car insurance companies charge premiums based on the amount of liabilities posed by the car. It does not consider whether you use your car daily or once in a month. The premium amount remains the same. However, pay as you drive insurance is sensitive to the usage of the car and charges premium based on the actual distance that you cover with your car. The lesser you use your car, the lower your car insurance premiums will get. Thus, you can save on insurance premiums with pay as you drive insurance if your car is occasionally driven. 

• Save Big on Lower Kilometer Slabs

  Some of the best car insurance companies offer discounts on premiums as per the kilometre slab you choose. You can save at least 5 per cent to up to 25 per cent on your premium on choosing a kilometre slab depending on your insurer. The discount is greater on lower kilometre slabs as it implies that your car is rarely used. A lesser-used car poses a lower liability on the insurance provider as compared to a car that is frequently on the road. Hence, the insurer rewards you by offering a big discount on the premium. The discount reduces as you move up the kilometre slab.

• Cover Multiple Cars Under Single Policy

  A few motor insurance companies provide pay as you drive car insurance as individual as well as floater cover. This means you can either buy separate car insurance for each of your vehicles or cover all your cars under a single car insurance policy. Even though the floater policy covers multiple cars, every car has a separate kilometre limit. Since multiple cars are covered under the same insurer, the premium is more economical than buying separate policies for each car.

  Besides, when you have multiple cars, the overall usage of each car reduces as you can use only one car at a point in time. Thus, you can pick a lower kilometre slab for each car and pay less for car insurance. So if you own more than one car, you can lower your overall car insurance cost by opting for pay as you drive car insurance with a floater cover.

• Doesn’t Consider the Make of the Car

  Unlike regular car insurance plans, pay as you drive insurance does not consider the make and model of your car while estimating the premium. Usually, luxury cars or higher-end car models attract higher insurance premiums. However, even high-end cars attract lower premiums under pay as you drive insurance if it is not used regularly. Thus, pay as you drive can help you save big on car insurance premium if you own a luxury car that is not used often.

• Renewal Discounts for Safe Driving Habits

  When you buy pay as you drive car insurance, your insurer will install a telematics device in your car. The device consists of a motion sensor that monitors the health of your car. It also monitors your driving habits and tracks the distance covered by your car under your kilometre slab. The data collected is monitored regularly to grant you points on safe driving habits. These points can help you earn discounts on premium during renewal.

  Moreover, the telematics device also alerts against dangerous driving habits and fuel slippage. Such information can be used to avoid any major problem in your car that may lead to a claim and result in the loss of your no claim bonus.

Should You Buy Pay As You Drive Car Insurance?

As a car owner, you should buy pay as you drive car insurance only if:

• Your car is not driven frequently
• If you prefer travelling through public transport instead of your own car
• If you travel outstation frequently and are unable to drive your car regularly
• If you get conveyance from your employer to commute to the office every day
• If you have multiple cars and cannot use all the cars optimally

In a Nutshell

Pay as you drive car insurance is one of the most affordable car insurance policy for people who do not drive their car regularly. It can help you save big on your premiums if don’t use your four wheeler for your everyday travel. You can further reduce the premium by driving safely. All you need to do is choose a suitable kilometre slab for your car and buy pay as you drive insurance from one of the best car insurance companies.