Evolution is a slow process – especially in the field of insurance. What was once just insurance involving rigid contracts with hardly any customization or flexibility available to the customer, is now a dynamic field with new products sprouting up ever so often.

Pay as you Drive (or Pay as you Go) insurance is one such motor insurance product designed to ease the burden of the cost of insurance where the customer has little choice due to its compulsory nature.

This is a form of insurance wherein the premium you pay depends on how much you use your car.

How does Pay as you Drive car insurance work?

At the time of buying your car insurance, your insurer will ask you to declare an estimate of distance you expect to travel during the year. Then, based on this, you will be assigned to a distance slab. Basically, the lesser the distance travelled, the higher the discount you can avail.

Generally, there are three slabs of distance travelled (depending on the insurance company) which you have to have to choose from at the time of buying the policy. These could be: 2500 Kms, 5000 Kms and 7500 Kms.

But what if you exceed the distance travelled as per your slab chose??

You’re still covered by your motor insurance policy! The only downside of exceeding the slab limit is that the discount available under the Pay as you Drive facility won’t be available to you.

What is the coverage under Pay as you Drive car insurance?

The coverage offered is the same as under a regular comprehensive motor insurance policy. The difference arises only in the premium you will pay which in turn depends on the usage of your car.

To simplify things, the ‘Own Damage (OD)’ portion of the premium depends on an estimate/ slab of distance travelled you, the policyholder.

Should YOU go for Pay as you Drive insurance?

Pay as you Drive car insurance could save you money on premiums:

• If you rarely travel long distances.
• If you own more than one car and this keeps the per vehicle usage low.
• If you have a car you rarely use for any reason! (i.e. you Work from Home, or you prefer using public transport etc.)

To summarise:

• If you don’t use your car a lot, Pay as you Drive is perfect for you.
• Your insurer may install at no cost a telematics device in your car to measure the distance travelled. Or they might simply take an odometer reading.
• You will have to declare an estimated distance you expect to travel during the year at the time of taking the policy.
• The final premium depends on the actual distance travelled during the year. The actual discount benefit is only available when it is proven (either by odometer readings or the insurance company’s telematics device) that the distance travelled is less than the slab’s limit.

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