The usage-based motor insurance, popularly known as ‘pay-as-you-drive’, allows customers to pay the premium depending on how many kilometers the car has traveled instead of the run of the mill full year.
Under this insurance scheme, a customer pre-declares vehicle usage for a period of one year. Over the past few weeks, several insurance companies have started offering pay-as-you-drive insurance. For drivers who aren’t constantly on the road, these plans can offer an opportunity to reduce car insurance costs, say insurance experts.
How ‘pay-as-you-use’ model works: Pay-as-you-drive policy is a combination of comprehensive own damage (OD) and third party (TP) cover, in which the mandatory TP coverage will be standard as per the insurer, while discounted OD cover will be offered in three slabs of kilometres — 2,500 km, 5,000 km and 7,500 km.
The premium will be fixed on the basis of the package selected, which could be 20-30 per cent lower than the standard one-year OD cover. For example, Bharti Axa is giving a discount of 25 per cent for 2,500 km slab, 15 per cent for 5,000 km and 10 per cent for 7,500 km slab against the regular comprehensive policy.
You can top up your plan if you are about to exhaust your kilometres. In case of Tata AIG, you can carry forward the unused top-up kilometres at the time of renewal. “Only top-up kilometres will be carried forward, not the remaining kilometres of the package bought,” says Parag Ved, Head and EVP – consumer line, Tata AIG General Insurance.
Edelweiss General Insurance policy is slightly different in the sense that it will let you switch your motor insurance ‘on’ and ‘off’ based on the usage. It will also cover multiple vehicles under a single policy as it is a floater policy.
How insurers will track distance: Either insurers will ask you to share your odometer reading with them or they will install a telematics device in your car which will track the kilometres driven. “Our app-based device ‘AutoSafe’ has many features which inform consumers about distance covered to how you drive along with GPS-based anti-theft tracking.
The information collected is evaluated over time and each driver cum policyholder is allocated points based on performance,” says Ved of Tata AIG.
Who should buy it: If your existing policy is about to expire and you know you are unlikely to take your car out frequently in the coming days, you can consider this policy. “Package-based ‘pay as you use’ will come handy for those who may not travel much but drive daily, while Edelweiss’ pay-per-day-basis policy will be useful for those who seldom take their car out, but travel a long distance,” suggests Chowdary of Policybazaar.com.
Ultimately, it’s your choice, whether you want convenience of one-time payment and carefree coverage for the whole year or are comfortable with proactively tracking your kilometres and being conscious about keeping your policy running.
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