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High motor Insurance premium rates have been a cause of worry for many. Hence IRDAI introduced vehicle insurance based on usage where premium is levied as per kilometers traveled. Let us find out more.
‘Pay as you drive’ and ‘How you drive’ are two important vehicle insurance policies introduced by IRDAI recently, looking at the high motor insurance rates. Let us understand these two insurances further in this post for better understanding.
‘Pay As You Drive’ and ‘How You Drive’ Insurances
IRDAI has recently announced the launch of two new policies to cater to the needs of car owners who have limited car usage and who are covered with third-party insurance only. So, such people can now avail of the policies of ‘Pay as you drive’ and ‘How you drive’ to ensure the safety of their own cars against damages.
‘Pay As You Drive’ (PAYD) Insurance – Features
As mentioned above, these policies are solely meant for car owners who do not drive their car on a regular basis. Thus, they could pay for whatever usage of car they have and thereby save on their premium payment.
Below are some features for the better understanding of the policy:
|1. The policy allow discount on premium as per the car usage and kilometers covered (which must be under 15000 km per year)||2. To avail the benefit of the plan, policyholder should upload a video of their car to declare the odometer reading before the expiry of his/her current motor insurance policy|
|3. Suits people who use their vehicles rarely or who are occasional users of their personal cars||4. Policyholders can save up to 10% on own damage premiums|
How Does ‘Pay As You Drive’ Insurance Work?
The concept of Pay As You Drive (PAYD) is new as it was launched recently. It helps policyholders to modify insurance plans as per requirement and hence lower the premium amount. A PAYD vehicle insurance plan comes with the obligatory third-party liability insurance for the policy tenure. It also offers Own Damage protection to the insured car, which is calculated as per distance covered by the car.
Hence, under this policy the insured pays the premium only for the kilometers that they travel. Here’s how the PAYD insurance works in five simple steps:
|1. Declare Your Car Usage|
|2. Declare the Odometer Reading|
|3. Policyholder to declare kilometers (No Need of Telematics)|
|4. Avail Discount on Premium|
|5. Easy Claim Settlement|
Lets understand them in detail:
- Declare Your Car Usage – The premium of this new car policy is decided on the usage of the vehicle. So, the policyholder will pay as per the kilometers run by their car. At present, 15000 km is the number that is fixed for per year usage for each car insured under Pay As You Drive policy. So, if the policyholder drives his/her car for less than 15000 kms per year, he/she becomes eligible for the plan.
- Declare the Odometer Reading – Odometer reading is another important aspect of the PAYD plan. Here, the policyholder is expected to declare the odometer reading of their vehicle by uploading a video before the expiry of their current policy to initiate the Pay As You Drive policy.
- Policyholder declares kilometers (No Need of Telematics) – The telematics device is used to keep a track of the distance that a vehicle covers. It is also used to track many other analytical aspects of the insured car. However, at the moment no such device is required to be installed by the policyholder to track distance. Rather, the policyholder can declare the kilometers/distance covered by his/her car to avail the benefit of the plan.
- Avail Discount on Premium – Under the Pay as you Drive car insurance, the policyholder can avail a discount of over 10% on the premium paid for the damages incurred on own car.
- Easy Claim Settlement – If the claim remains within the prescribed limit of 15000 kilometers per year, the settlement of claims remains normal like in other plans. However, if the policyholder’s car usage exceeds the specified limit (of 15000 km), he/she might have to pay the claim amount as co-pay.
>>Car Policy Premium Based on Your Driving Behavior – Know in Detail
Whom Does ‘Pay As You Drive’ Insurance Cater To?
Pay As You Drive or PAYD is a new insurance type for people in India where they can pay the premium depending on the kilometers driven. Hence, this policy sounds perfect for people who are not regular in driving their car.
The points below will clear your understanding about who all can benefit from this policy:
- Seasonal drivers who rarely drive their personal car
- Those having multiple cars (One vehicle is not used daily)
- People who like to use their personal car only during a particular season like monsoon, winters etc.
- People who do not drive that frequently
What is ‘How You Drive’ Insurance?
Like ‘Pay As You Drive’, ‘Pay How You Drive’ or PHYD is another plan in which a premium amount is charged as per how the vehicle is driven. Driving is an activity that should be done with extreme care to avoid accidents. Hence, it is important for everyone to inculcate good driving habits.
Safe Driving is important to avoid financial as well as legal hassles along with ensuring the safety of people on the road. Further, as per the new PHYD insurance plan, driving habit can also decide the premium to be paid on your vehicle insurance.
Since good and responsible drivers are less likely to get involved in accidents, hence they are levied with less premium on their car insurance. This is an entirely new model as compared to the traditional motor insurance models available.
This new concept introduced by IRDAI is likely to revolutionize the insurance sector. Here, the insurer can charge the insured as per his/her habit of driving. Hence, this policy makes the car owners conscious about how they drive so that they can pay a low premium. The plan was launched with the aim to encourage safety while driving.
Know More: Passenger Cover in Four-Wheeler Insurance: Things To Know
Things to Do Under ‘Pay How You Drive’ Insurance to Lower Premiums
|1. Follow Traffic Signals Sincerely||2. Never Involve in Drink and Drive Activities|
|3. Always Follow Speed Limit While Driving||4. Never Miss to Wear the Seat Belt|
|5. Maintain Defensive Technique of Driving||6. Remember you are Under GPS scanner|
Pay How You Drive or PHYD insurance is tracked with the help of a GPS tracker that is installed in the car of the policyholder. Here, the premium is determined on the basis of backend algorithms for each insured.
Read More: How To Claim Third Party car insurance In India?
To Sum Up
The introduction of PAYD and PHYD insurances are likely to transform the motor insurance sector to a great extent. It is important for car owners to have a better understanding of their pattern and behaviour of driving. Further, it is important to understand your particular needs of car insurance before selecting a policy. Thus, explore and compare plans before making the final decision.
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FAQs on #’Pay As You Drive’ and ‘How You Drive’
What is the ‘Pay As you drive’ insurance?
‘Pay As You Drive’ insurance is like a comprehensive car insurance plan that allows policyholders to save up on their own damage premiums. Thus, it helps a policyholder to lower his/her premium as per the usage of the car.
How does Pay As You Drive work?
A Pay As You Drive insurance policy comes with the obligatory third-party policy for the policy tenure along with offering own damage protection, which is calculated as per distance covered. Thus, this policy offers the mandatory Third-party Liability car insurance Policy for the policy period and the Comprehensive Coverage based on the distance travelled by the vehicle. Hence, you only pay the premium for the distance travelled.
What does Pay As You Drive insurance cover?
Under this plan, the insurer charges a fixed monthly or annual fee and covers your vehicle against various damages like accidents, fire, theft etc. However, if you drive extra than the prescribed kilometres under the plan (more than 1500 km per year), you would be charged for the extra distance travelled by paying the claim amount as co-pay.
Is Pay As You Drive insurance available in India?
Yes, the IRDAI has launched usage-based Pay As You Drive insurance in India recently. Under this policy, the insurance premium is charged depending on the kilometres travelled by a car.