A motor insurance policy is a must to fulfil the legal requirement of worries in India. The Motor Vehicles Act, 1988 states that each vehicle in India should have a legitimate 3rd party liability cover on it before it runs on roads. A motor insurance plan, that is why, is needed. While a 3rd party coverage is important, a comprehensive policy offers coverage against damages towards the vehicle and it is recommended.
When you are looking at comprehensive car insurance policy plans, as the coverage out of all available plans might be same, insurance companies introduce value-added benefits to make their policies attractive. New innovations are also introduced in comprehensive car insurance policy plans to adjust to the changing needs of people. The insurance coverage Regulatory and Development Authority of India has introduced a task called Sandbox wherein insurance companies can introduce new and innovative products for customers. One particular innovation, that has happened in the car insurance segment, may be the introduction of ‘Pay while you Drive’ car insurance plans. Let’s know very well what these plans are all about.
What may be the concept of ‘Pay as you Drive’ auto insurance?
A ‘Pay as you Drive’ car insurance policy is a car insurance policy wherein the own damage cover could be chosen in line with the using 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 will the ‘Pay while you Drive’ policy work?
Under the ‘Pay as you Drive’ auto insurance plan, there would be three distance slabs specified during the time of purchasing the policy. These slabs could be 2500 Km., 5000 Km. and 7500 Km. During the time of buying the policy, you would have to supply the insurance company using the current odometer reading of your car and choose the distance slab which you expect your vehicle to operate. The insurer would, then, determine the premium from the policy and also the policy could be issued for one year.
After purchasing the policy, you would need to track the length your vehicle travels during the policy year. If the distance exceeds the chosen slab, you can proceed to the next higher slab or convert the policy right into a regular auto insurance plan. In both the instances, the premium would increase and also you would have to spend the money for premium impact on the insurer. If, however, the length exceeds the chosen slab and you don’t inform the insurer, subsequent own damage claims may 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 that plan?
Third party premium would remain unaffected and depends on the cubic capacity of your car. In the event of own damage premium, however, you would be in a position to avail a discount in line with the distance slab that you have chosen. The discount could be higher for any lower slab and vice versa and the discount rates would depend around the company from whom you are buying the policy. The aggregate premium would, therefore, be calculated as the third party premium as well as the discounted own damage premium.
For whom is the ‘Pay as you Drive’ policy suitable?
The ‘Pay as you Drive’ policy would work in the following cases –
- If you use your vehicle sparingly during a year and rely on public modes of transport primarily
- If you have multiple cars as well as your usage is divided across those cars
In these instances, you can choose ‘Pay as you Drive’ policy and reduce your premium outgo. Especially in case of multiple cars, when you purchase a ‘Pay as you Drive’ car insurance policy for the cars, you will get attractive discounts and reduce your premium outgo considerably.
Things to know about ‘Pay as you Drive’ car insurance policies
Here are several important facts about ‘Pay while you Drive’ car insurance plans which you ought to know –
- This is really a new concept which has been allowed through the IRDAI on the trial basis. If insurance companies manage to sell a minimum of 10,000 such policies inside the first 6 months of launch, the product could be made permanent
- Only a few insurance companies are currently providing the ‘Pay while you Drive’ car insurance plan. Included in this are Bharti AXA, ICICI Lombard and Acko General Insurance among others
- The coverage is on select platforms that the insurance company has tied-up. These platforms include insurance aggregator websites and other online platforms as chosen by the insurance company
- You need to constantly monitor your odometer reading just like any excess usage over the chosen slab would want you to pay a higher premium for availing coverage
How to purchase ‘Pay as you Drive’ auto insurance plans
As mentioned earlier, ‘Pay as you Drive’ auto 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 towards the insurance company. Following the premium continues to be calculated according to your slab preference, you spend the premium to buy the insurance policy instantly from the channels that offer such plans.
You may also buy a suitable car insurance policy from Turtlemint’s platform if you are not looking to purchase a ‘Pay while you Drive’ plan. Turtlemint is tied-up with leading car insurance companies and enables you to compare the accessible plans before buying. By comparing the accessible policies you can choose a plan using the best coverage benefits and the lowest premium rates. So, for a car insurance policy you are able to choose Turtlemint and purchase the insurance policy online instantly in a few steps.
A auto insurance plan's a must if you possess a car but before buying a policy, pick the preferred coverage that you need. If you are using your vehicle sparingly apply for a ‘Pay as you Drive’ plan but comprehend the plan completely before buying. For other people, whose cars serve their transportation needs, an ordinary comprehensive policy will be a better option for any comprehensive coverage. So, assess your requirements and then choose your policy.
Frequently Asked Questions
- If my usage has exceeded by chosen slab, would 3rd party claims be taught in policy?
Yes, 3rd party claims could be taught in ‘Pay while 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 insurer providing the policy. For instance, currently as on 3rd June 2021, Bharti AXA provides a discount of 25% for the slab of 2500 Km., 15% for 5000 Km. and 10% for 7500 Km. ICICI Lombard, however, provides a discount of 5% to 10% on the own damage premium. Thus, the discount offered is company specific.
- What may be the coverage amount of ‘Pay as you Drive’ plans?
‘Pay while you Drive’ auto insurance plans are allowed for one year.
- Can I personally use my existing no claim bonus to avail an additional discount in the own damage premium basically pick the ‘Pay while you Drive’ policy?
Yes, the existing no claim bonus discount can be used to claim an additional reduction in the own damage premium within the ‘Pay while you Drive’ car insurance plan.
