Pay-as-you-drive policy’s premium is based on your driving habits
If you drive your car less frequently, opt for a pay-as-you-drive (PAYD) motor insurance policy as the premiums are based on the actual usage of the vehicle. The PAYD policies also offer increased flexibility and customisation. The premiums are determined by several factors such as your driving habits, the pricing structure of the insurer, and the coverage type you select besides the actual kilometres driven.
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Rakesh Goyal, director, Probus Insurance Broker, says as premiums are based on the actual distance covered, a PAYD policy can provide an excellent alternative for those who less frequently. “It can also incentivise safe driving practices as the cost is directly linked to driving behaviour.”
In case of PAYD, similar to all motor insurance policies, the premium of the mandatory third-party insurance is fixed by the ministry of road transport and highways. For the own damage part, the premium is based on the kilometer plans. Several insurers have launched the PAYD policies. For instance, in HDFC Ergo’s Pay As You Drive —Kilometer Benefit add-on cover, anyone driving less than 10,000 km in a year can benefit up to 25% of their own damage premium, subject to the odometer reading. In Kotak General Insurance’s Kotak Meter, a policyholder can switch off own damage cover when not driving and save on the premium.
Chirag Nihalani, general manager, Insurance Samadhan, says a PAYD policy can be a good option for those who want a more flexible and cost-effective insurance solution that aligns with their driving habits. “Drivers can choose the coverage and options that best suit their driving habits and budget, rather than being limited to a one-size-fits-all policy.”
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Types of PAYD policies
Insurers offer various types of PAYD policies such as distance-based, behaviour-based and even hybrid ones. In the distance-based, the premium is based on the distance traveled by the vehicle and is suitable for those who use their vehicles infrequently or for short distances. The behaviour-based policies use telematics devices to track driving behavior, such as speed, acceleration, and braking and the premium is calculated based on how safely the driver operates the vehicle.
In a hybrid policy, the premium is calculated based on both the distance traveled and the driving behaviour.
Factors to consider
Before opting for a PAYD policy, review the coverage options offered by different insurers and compare them to a traditional comprehensive motor policy. Some PAYD policies may offer limited coverage or exclude certain types of damages or incidents.
Goyal suggests looking for policies with customisable options that fit one’s specific driving habits and needs. “Consider the premium rates, deductibles, and coverage limits to determine if the cost savings justify the reduced coverage. Check out different usage-based policies offered by insurers to compare the features and benefits they offer,” he says.
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Some PAYD policies require the installation of telematics devices, which track driving behaviour and mileage. Nihalani says telematics devices may collect personal data, such as driving behaviour and location, which raises privacy concerns. “It’s important to review the insurer’s privacy policy and understand how personal data is collected, used, and protected,” he says. One must understand the discounts and rewards offered by insurers for safe driving behaviour or low mileage and know how they can be redeemed.
BEHIND THE WHEEL
* Insurers are offering various types of pay-as-you-drive (PAYD) policies such as distance-based, behaviour-based and even hybrid ones
* PAYD policies may offer limited coverage or exclude certain types of damages, so go through the fine print also
