If your car stays parked most of the time and you don’t cover a lot of distance every year, there’s good news! Insurance companies are now offering Pay-As-You-Drive (PAYD) insurance policies, which allow you to pay a lower premium based on your car’s mileage. This option benefits those who drive fewer kilometers annually, making it ideal for people with low vehicle usage.
How PAYD Insurance Works
Under PAYD insurance, the premium is linked to the kilometers you plan to drive during the policy period. You can select a preset mileage plan—such as 2,500, 5,000, or 7,000 kilometers—depending on how much you expect to drive. This mileage cap determines the amount of premium you pay. If you drive less, you save more on insurance costs.
For example, if you choose a 2,500 km plan, your insurance premium will be significantly lower than that of a regular comprehensive policy. Similarly, there are 5,000 km and 7,000 km options if your usage is moderate.
Companies like ICICI Lombard and Reliance General Insurance currently offer these types of PAYD plans. ICICI provides plans for 5,000 and 7,000 kilometers, while Reliance offers options for 2,500 and 5,000 kilometers.
Benefits of Pay-As-You-Drive Insurance
- Lower Premiums: Save money by paying only for the kilometers you drive.
- Custom Plans: Choose a plan that matches your expected driving needs—ideal for occasional drivers.
- Easy Access: These plans are becoming increasingly available through select insurers.
What to Watch Out For
While PAYD insurance offers significant savings, it comes with some limitations:
- Mileage Limit: Once you exceed your chosen limit, your policy becomes invalid. For example, if you have a 5,000 km plan and exceed that limit, the coverage will no longer be active unless you renew the policy.
- No Claim Beyond Limit: If your car gets damaged after crossing the mileage limit, you won’t be able to claim insurance benefits.
It’s essential to keep an eye on your car’s mileage throughout the policy term to avoid any lapses in coverage.
Is PAYD Insurance Right for You?
PAYD insurance is an excellent option if:
- You use your car only occasionally or for short distances.
- You want a more affordable insurance option without compromising coverage.
- You’re comfortable keeping track of your car’s mileage regularly.
However, if you’re unsure about your future driving patterns or tend to exceed your planned mileage, a regular comprehensive policy might be more suitable. It ensures continuous coverage regardless of how much you drive.
Pay-As-You-Drive insurance reflects the shift towards personalized insurance policies, giving drivers the flexibility to pay based on their actual usage. As more insurers introduce such plans, it’s worth exploring whether you can benefit from one of these mileage-based policies. If you drive less, why pay more?
