What is Pay As You Drive Insurance?
It is a newly-launched usage-based car insurance plan for private cars under the sandbox project of the IRDAI or the Insurance Regulatory and Development Authority of India. The project is currently available on a pilot basis for one year.
It is offered under different names from different companies like Pay Per Km Insurance from ICICI Lombard, Pay As You Drive from HDFC Ergo and Bajaj Allianz etc.
The pay as you go car insurance is considered more affordable as compared to regular car insurance plans. This is because the premium under this plan is charged based on the kilometers driven.
Usage-based insurance has been widespread in developed countries, but now is introduced in India as well.
What are the features of Pay As You Drive Insurance?
- Pilot Sandbox project of IRDAI
- Initial policy tenure of one year
- More affordable in comparison to the regular comprehensive one year motor insurance policy
- IRDAI decides the third party premium
- OD Premium depends on car usage slab as per the total kilometer covered.
How does the pay As You Drive Insurance work?
When you purchase this type of policy, you need to pay a motor insurance premium for a pre-specified number of kilometers (2000/4000/6000Km or 2500/5000/7500Km). In case you cross this predefined distance, you can renew it with additional kilometers. You must note, availing a usage-based plan will require you to frequently top-up if there is a rise in the use of your vehicle.
How is your usage tracked in Pay Per Kilometer Insurance Package?
Under this type of car insurance plan, a telematics device is installed in your car free of cost. This device constantly monitors the condition of your car, kilometer travelled and the driving habits of the insured.
Telematics is a mix of telecommunications and informatics – it is used to keep track of driving-related data, including storage and transfer of that information. In the auto insurance industry, this data is essential to gain an understanding of driving behavior and gauge the appropriate vehicle insurance rate.
Should You buy Pay As You Drive Insurance Policy?
It is generally beneficial for people who do not use their cars often. Following kind of people can get benefit from pay per Km insurance policy
- Car owners who drive their car very less
- Car owners who own multiple cars and do not use all their cars equally
- People who live in metro cities and commute by metro, local train or other public transport
- People who generally live outside their cities and are unable to use their car often
Companies that offer Pay As You Drive Insurance Policy
- Bharti AXA (Temporarily Discontinued)
- ICICI Lombard