A motor insurance policy is a must to fulfil the legal requirement of driving a vehicle in India. The Motor Vehicles Act, 1988 states that every vehicle in India should have a valid third party liability cover on it before it runs on roads. A motor insurance policy, that is why, becomes necessary. While a third party coverage is essential, a comprehensive policy offers coverage against damages to the vehicle and is recommended.
When it comes to comprehensive motor insurance plans, while the coverage in all the available plans might be same, insurance companies introduce value-added benefits to make their policies attractive. New innovations are also introduced in comprehensive motor insurance plans to adapt to the changing needs of individuals. The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a project called Sandbox wherein insurance companies can introduce new and innovative products for customers. One such innovation, which has happened in the car insurance segment, is the introduction of ‘Pay as you Drive’ car insurance plans. Let’s understand what these plans are all about.
What is the concept of ‘Pay as you Drive’ car insurance?
A ‘Pay as you Drive’ car insurance policy is a comprehensive car insurance policy wherein the own damage cover can be chosen based on the usage of the car. The policyholder would have to declare the expected kilometres which the car would run in a year and based on the expected distance, the premium of the policy would be determined.
How does the ‘Pay as you Drive’ policy work?
Under the ‘Pay as you Drive’ car insurance plan, there would be three distance slabs specified at the time of buying the policy. These slabs would be 2500 Km., 5000 Km. and 7500 Km. At the time of buying the policy, you would have to provide the insurance company with the current odometer reading of your car and choose the distance slab which you expect your car to run. The insurance company would, then, determine the premium of the policy and the policy would be issued for one year.
After buying the policy, you would have to track the distance your car travels during the policy year. If the distance exceeds the chosen slab, you can move to the next higher slab or convert the policy into a regular car insurance plan. In both the cases, the premium would increase and you would have to pay the premium difference to the insurance company. If, however, the distance exceeds the chosen slab and you don’t inform the insurance company, subsequent own damage claims might not be covered by the plan. Third party claims would be, however, covered irrespective of the distance travelled by the car.
How is the premium computed for the plan?
Third party premium would remain unaffected and would depend on the cubic capacity of your car. In case of own damage premium, however, you would be able to avail a discount based on the distance slab that you have chosen. The discount would be higher for a lower slab and vice versa and the discount rates would depend on the company from whom you are buying the policy. The aggregate premium would, therefore, be calculated as the third party premium plus the discounted own damage premium.
For whom is the ‘Pay as you Drive’ policy suitable?
The ‘Pay as you Drive’ policy is suitable in the following cases –
- If you use your car sparingly during a year and depend on public modes of transport primarily
- If you have multiple cars and your usage is divided across those cars
In any of these instances, you can choose ‘Pay as you Drive’ policy and reduce your premium outgo. Especially in case of multiple cars, if you choose a ‘Pay as you Drive’ car insurance policy for all the cars, you can get attractive discounts and reduce your premium outgo considerably.
Things to know about ‘Pay as you Drive’ car insurance policies
Here are a few important facts about ‘Pay as you Drive’ car insurance plans which you should know –
- This is a new concept which has been allowed by the IRDAI on a trial basis. If insurance companies manage to sell at least 10,000 such policies within the first 6 months of launch, the product would be made permanent
- Only a few insurance companies are currently offering the ‘Pay as you Drive’ car insurance plan. These include Bharti AXA, ICICI Lombard and Acko General Insurance among others
- The policies are available on select platforms with which the insurance company has tied-up. These platforms include insurance aggregator websites and other online platforms as chosen by the insurance company
- You have to constantly monitor your odometer reading as any excess usage over the chosen slab would need you to pay a higher premium for availing coverage
How to buy ‘Pay as you Drive’ car insurance plans
As mentioned earlier, ‘Pay as you Drive’ car insurance plans are being currently offered through select channels. To buy the policy you would have to provide your odometer reading, KYC details and a consent form to the insurance company. After the premium has been calculated based on your slab preference, you have to pay the premium to buy the policy instantly from the channels which offer such plans.
You can also buy a suitable car insurance policy from Turtlemint’s platform if you are not looking to buy a ‘Pay as you Drive’ plan. Turtlemint is tied-up with leading car insurance companies and allows you to compare the available plans before buying. By comparing the available policies you can choose a plan with the best coverage benefits and the lowest premium rates. So, for a comprehensive car insurance policy you can choose Turtlemint and buy the policy online instantly in a few steps.
A car insurance plan is a must if you own a car but before buying a policy, choose the preferred coverage that you need. If you use your car sparingly you can go for a ‘Pay as you Drive’ plan but understand the plan completely before buying. For others, whose cars serve their transportation needs, a normal comprehensive policy would be a better choice for a comprehensive coverage. So, assess your needs and then choose your policy.
Frequently Asked Questions
- If my usage has exceeded by chosen slab, would third party claims be covered by the policy?
Yes, third party claims would be covered by the ‘Pay as you Drive’ car insurance policy even if your usage has exceeded the distance slab that you had chosen.
- How much premium discount is offered by ‘Pay as you Drive’ plans?
The rate of premium discount depends on the insurance company offering the policy. For instance, currently as on 3rd June 2020, Bharti AXA offers a discount of 25% for the slab of 2500 Km., 15% for 5000 Km. and 10% for 7500 Km. ICICI Lombard, on the other hand, offers a discount of 5% to 10% on the own damage premium. Thus, the discount offered is company specific.
- What is the coverage duration of ‘Pay as you Drive’ plans?
‘Pay as you Drive’ car insurance plans are allowed for one year.
- Can I use my existing no claim bonus to avail a further discount in the own damage premium if I choose the ‘Pay as you Drive’ policy?
Yes, the existing no claim bonus discount can be used to claim a further reduction in the own damage premium in the ‘Pay as you Drive’ car insurance plan.