Pay Premium Only on Distance You Travel

Recently, the Insurance Regulatory and Development Authority of India (IRDAI) has created a new type of car insurance policy. It is a pilot project that will be launched nation-wide if the sales are booming. Under this policy, private car owners will be offered usage-based motor insurance policies. These plans are currently being sold by only a handful of general insurers across India.

The usage-based car insurance plan, also known as a pay-as-you-drive policy, is different from a standard car insurance plan. Under a pay-as-you-drive car insurance plan, you are required to pay the premium only on the number of kilometers your car has traveled. Before the inception of this policy, the policyholder is required to declare the car usage for a period of a single financial year. This plan is ideal for car owners with multiple vehicles who do not utilize all of their cars on a daily basis.

How Does This Policy Work?

The concept behind this policy is simple - pay as you drive your vehicle. The distance will be taken into consideration for the purpose of premium payment. Under this policy, you get the combined benefits of own damage and third party liability cover along with a discount on your own damage premium based on the slabs of the kilometers travelled.

This policy has been allowed because many people are working from home. Due to the COOVID-19 pandemic, most of the salaried and working-class people who commute via car are sitting at home. Due to the strict curfew and lockdown measures, people are not able to utilize their vehicles effectively. Therefore, insurance companies have launched such a plan.

Key Features of this Plan,

• This is just a pilot project. It is not launched entirely across the country. No more than 5-6 general insurers are selling this product.
• Since it is a pilot project, the premium of this policy is less expensive in comparison to a standard car insurance plan.
• Under this plan, you have to option to select pay as per the distance travelled by your car (kilometer based package)
• The third-party liability cover will be available throughout the year.
• The own-damage premium cover will be available till you exhaust your package.
• In order to promote this plan, the general insurers are offering value-added benefits for safe-driving
• If you are actively tracking the distance of your car, you can select this usage-based policy.

How is the Premium Calculated

As mentioned above, the third party liability cover is standard under the pay-as-you-drive policy. The own-damage premium is based on the distance travelled. This is classified on three slabs of kilometers - 2500 kilometers, 5000 kilometers, and 7500 kilometers. The premium is based on any of the three packages that you have selected. For example, you can avail of a discount of up to 25% for a 2500 kilometers package, 15% for 5000 kilometers package, and 10% for 7500 kilometers.

In addition, you also have the option to top-up your policy if you have successfully exhausted your kilometers. You can also carry forward the remainder kilometers from the previous policy to the upgraded policy.

Apart from this, you also have the option to switch the car policy based on the usage.

Since pay-as-you-drive is a distance-based insurance policy, the general insurer will take regular measurements of the kilometers travelled via the odometer or GPS tracking. Many insurers have also agreed to install a telematics device inside the car for easily tracking the distance travelled.

Here is an example of pay-as-you-drive insurance plans along with the insurance company in India.

Edelweiss General Insurance SWITCH

This is a drive based pay-as-you-drive car insurance plan. Under this policy, you have the option to switch your car insurance cover ON and OFF based on the usage. This policy can also be availed on a family floater basis. Edelweiss SWITCH is beneficial for car owners as they have to pay premium only for the days he/she has utilized their vehicle for commuting.

Key Features of this Plan,

• You can cover up to 3 vehicles under a single premium paying plan option.
• Option to carry forward unused premium amount
• Option to add as well as remove the number of vehicles under a single policy
• Flexible policy term along with the sum insured

What is Covered?

• Road accidents while you are driving the vehicle
• Loss and theft
• Fire and explosion
• Natural disasters and terrorism

What is Not Covered?

• Any type of loss or damage that has not been updated in the policy app
• Driving without a valid drivers license
• Driving under the influence of alcohol, drugs, or narcotics
• Depreciation caused by normal wear and tear, mechanical breakdown
• Other insurers that offer such a plan are ICICI Lombard General Insurance, and TATA AIG General Insurance.

What are the Benefits of Buying Car Insurance Online?

Buying a car insurance policy online has multiple benefits. Here are a few:

• No agent needed - When you buy a car insurance policy online, you do not need the advice of an agent, intermediary or third party. You get complete information along with the policy document on Coverfox. In addition, Coverfox has an entire library of articles, infographics, blogs, videos that will help you understand complex; insurance terms and jargon with ease.
• When you purchase a car insurance plan online, you are getting a genuine policy provided by the insurance. Plus, you are directly buying it from the aggregator or the insurers website. All of the policies mentioned online are approved by the Insurance Regulatory and Development Authority of India.
• With the online mode, you can also keep a check on the insurance provider's credibility. You can look at the claims settlement ratio and incurred claim settlement ratio. Plus, you can seek online reviews/comments/testimonials from existing policyholders with regard to the customer service being offered. This will help you determine the insurer's credibility.
• The online mode offers a completely seamless buying process. There is no paperwork required; all you need to do is click a photo of the relevant documents and upload it on the insurers website. Also, once you buy the policy from Coverfox, it is delivered instantly to your inbox in 5 minutes.
• With the online mode, you can easily compare multiple plans offered by different insurers online. You can look at the key features and benefits, inclusions and exclusions, terms and conditions, all on a single web page at the click of a button. You no longer need to visit the website of multiple insurers or manually visit the bank branch. You can also utilize a free tool - car insurance premium calculator that will help you determine the right amount if premium for a car insurance plan.

In Simple Words,

Pay as you drive car insurance plan is ideal for car owners that have multiple vehicles and private cars. If you do not utilise all of your cars at once, you should go for a pay as you drive car insurance policy.

Also Read: The Ultimate Cheat Sheet to Calculate Your Car Insurance Premium

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