How Does Pay as You Drive Insurance Work?

Car insurance is essential not only because it is mandatory but also vital for your safety. But what if you could customise your car insurance premium as you drive? – Yes, this has become possible because of the introduction of Pay As You Drive Insurance.

Let's see what it is and how it works.

What is Pay As You Drive Car Insurance?

Pay As You Drive car insurance is an add-on cover that lets you pay car insurance premiums based on the kilometres you’ve driven. It is a usage-based add-on that adjusts premiums to your driving habits.

This means that, unlike a comprehensive or third-party car insurance plan, where premiums are fixed at a flat rate, your premiums will be based on how much you’ve used your car in a year.

Therefore, Pay As You Drive car insurance offers comparatively lower insurance premiums because it allows you to choose the kilometres you will cover in a year and pay only for those kilometres. In simple terms, if you drive less, you pay less.

How Does Pay As You Drive Insurance Work?

When you opt for Pay As You Drive car insurance, you are required to choose an estimated distance that you plan to drive in a car policy year. This estimated distance is known as "Kilometre Limit" or "Available Kilometres" and can be set in various slabs starting from 2,500 km. You can increase it to multiples of 1,000.

Usually, you must declare your current odometer reading when purchasing and renewing the insurance policy. This will allow you to determine whether you have exceeded the Kilometre Limit or stayed within it.

For instance, if your odometer reading at the time of purchasing the car policy is 2,000 km, and you decided on the Kilometre Limit of 2,500 km. At the end of your car policy, your odometer reading should show 4,500 km or lower.

In the event that you run out of Available kilometres, you will be allowed to add more or extra kilometres as a "Top Up Limit” to ensure insurance coverage for the rest of the car policy period.

If you have any unused kilometres remaining, you can carry them forward to the next policy year.

Some insurance providers also offer Grace Kilometres to give you adequate time to renew your Pay As You Drive car insurance policy before you run out.

To Wrap It Up

There are several benefits you can avail yourself of with the best pay as you go car insurance plan. These benefits include - lower car insurance premiums, flexible insurance coverage that adapts to driving habits, carrying forward unused kilometres and top-up in case you run out of kilometres.

Ensure that the insurance provider you choose to buy Pay As You Drive car insurance from offers all these benefits.

If you are an infrequent driver, own multiple cars or prefer using public transport, Pay As You Drive car insurance can be very beneficial. It ensures coverage at a low premium rate.