The insurance you drive and how you operate the insurance

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High motor insurance premium rates are a concern for many people. So IRDAI introduced auto insurance where the premium is charged according to the kilometers travelled. Let’s find out more.

‘Pay as you drive’ and ‘How you drive’ are two important auto insurance policies introduced by IRDAI recently. Motor insurance rates. Let us understand both these insurances in this post for better understanding.

‘Pay as you drive’ and ‘How you drive’ insurance

IRDAI has recently announced the introduction of two new policies to cater to the needs of car owners with low car usage and only third party insurance. Hence, such individuals can now ensure the protection of their own cars against damages using ‘Pay As You Drive’ and ‘As You Drive’ policies.

‘Pay As You Drive’ (PAYD) Insurance – Features

As mentioned above, these policies are only for car owners who do not drive their car regularly. This way, they can pay for any use of the car they own, thereby saving on their premiums.

Below are some aspects for better understanding of the policy:

1. The policy allows discounts on premium based on car usage and kilometers (must be within 15000 km per year). 2. To avail the benefit of the scheme, the policyholder has to upload a video of their car to declare the odometer reading before the expiry of their existing motor insurance policy.
3. Ideal for those who use their vehicles infrequently or those who use their personal cars occasionally 4. Policyholders can save up to 10% on own damage premium

How does ‘pay as you drive’ insurance work?

The concept of Pay As You Drive (PAYD) was launched recently. It enables the policyholders to modify the insurance plans as per their need, hence reducing the premium amount. PAYD auto insurance plan comes with compulsory third party liability insurance for the policy period. It also provides own damage cover to the insured car which is calculated according to the distance covered by the car.

Hence, under this policy the insured pays the premium only for the kilometers they travel. Here’s how PAYD Insurance works in five simple steps:

1. Report your car usage
2. Report the odometer reading
3. Policyholder to declare kilometers (no need for telematics)
4. Get discount on premium
5. Easy claim settlement

Let’s understand them in detail:

  1. Report your car usage – The premium of this new car policy is determined based on the usage of the vehicle. Hence, the policyholder will pay according to the kilometers driven by their car. Currently, 15000 km is the fixed number for annual usage for each car insured under Pay As You Drive policy. Therefore, if the policyholder drives his/her car less than 15000 kilometers per year, he/she qualifies for the scheme.
  2. Report the odometer reading – Odometer reading is another important feature of PAYD scheme. Here, the policyholder is expected to declare their vehicle’s odometer reading by uploading a video before the current policy expires.
  3. Policyholder declares kilometers (no telematics required) – A telematics device is used to monitor the distance traveled by a vehicle. It is also used to monitor several analytical aspects of the insured car. However, no such device is currently required to be installed by the policyholder for remote monitoring. Instead, the policyholder can declare the kilometers/distance covered by his car to get the benefit of the scheme.
  4. Get discount on premium – Under pay through car insurance policyholder can avail more than 10% discount on premium paid for damages to own car.
  5. Easy claim settlement – If the claim is within the stipulated limit of 15000 kilometers per annum, the settlement of claims will be normal like other schemes. However, if the policyholder’s car usage exceeds a certain limit (15000 km), he/she will have to pay the claim amount as a co-payment.

read more: Car policy premium based on your driving behavior – know in detail

Who does ‘pay as you drive’ insurance help?

Pay-as-you-drive or pay-as-you-go is a new type of insurance for people in India, where they can pay premiums based on the kilometers they drive. Hence, this policy is perfect for those who are regular in driving their car.

The points below will clarify your understanding of who can benefit from this policy:

  • Seasonal drivers who rarely drive their personal car
  • Owners of multiple cars (one vehicle is not used daily)
  • People who want to use their personal car only during certain seasons like monsoons and winters.
  • People who don’t drive it often

Learn more: How to check online traffic challan status and pay Delhi Police traffic e-challan

What is ‘How You Drive’ Insurance?

‘Pay As You Drive’, ‘Pay How You Drive’ or PHYD is another scheme where the premium is charged based on how the vehicle is driven. Driving is an activity that needs to be done with utmost care to avoid accidents. Therefore, it is important for everyone to develop good driving habits.

Safe driving is important to ensure the safety of road users and avoid financial and legal issues. Also, according to the new PHYD insurance plan, driving habits can also determine the premium you pay on your auto insurance.

Because good and responsible drivers are less likely to get into an accident, their car insurance is charged with lower premiums. It is a completely new model compared to traditional motor insurance models.

This new concept introduced by IRDAI will revolutionize the insurance industry. Here, the insurer can charge the insured according to his driving habits. Hence, this policy makes car owners aware of their driving style so that they can pay lower premiums. The program was launched to promote safety while driving.

Learn more: Passenger Cover in Four Wheeler Insurance: Things to Know

Things to do under ‘how you drive’ insurance for lower premiums

1. Follow traffic signals faithfully 2. Never engage in drunk driving activities
3. Always follow the speed limit while driving 4. Don’t forget to wear seat belt
5. Maintain defensive driving technique 6. Remember you are on a GPS scanner

How you drive or PHYD insurance is tracked with the help of a GPS tracker installed in the policyholder’s car. Here, the premium is determined based on each insurer’s backend algorithms.

read more: How to get third party car insurance in India?

In total

Introduction of PAYD and PHYD insurance will change the motor insurance industry in a big way. It is important for car owners to have a good understanding of their driving style and behavior. Also, it is important to understand your specific needs for car insurance before choosing a policy. So, research and compare the plans before taking a final decision.

read more: Auto Insurance Details How to Find Vehicle Registration Number?

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#Frequently asked questions on ‘Pay as you drive’ and ‘How to drive’

What is ‘pay as you drive’ insurance?

‘Pay As You Drive’ insurance is a comprehensive car insurance plan that allows policyholders to save on their own damage premium. Hence, it helps in reducing the policyholder’s premium according to the usage of the car.

How does paying for your drive work?

A pay-as-you-drive insurance policy comes with a compulsory third-party policy for the policy period as well as own damage cover, which is calculated according to distance. Hence, this policy provides compulsory third party liability car insurance policy for the policy period and comprehensive coverage based on the distance traveled by the vehicle. So, you have to pay premium only for the distance traveled.

What is the insurance premium you pay when you drive?

Under this plan, the insurer charges a fixed monthly or annual premium and covers your vehicle against various damages like accident, fire, theft etc. However, if you drive more than the prescribed kilometers (more than 1500 km per year) under the scheme, you will be billed for the extra distance traveled by paying the claim amount as co-pay.

Is payment insurance available in India?

Yes, IRDAI has recently introduced usage based Pay As You Drive insurance in India. Under this policy, the insurance premium is charged depending on the kilometers traveled by the car.



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