Car insurance: Why should you opt for ‘Pay as You Drive’ cover?
vehicle insurance incurs regardless of the vehicle’s usage? What if you take your car out of the garage only once a week for a short drive. Effectively, less car usage means lower possibility of collision and therefore, leads to fewer insurance claims. This should, ideally, incentivise the policyholder to pay a lower premium but it doesn’t happen in a standard comprehensive car insurance plan.
The alternative, however, is ‘pay as you drive’ insurance plan. Pay as you drive is an insurance plan that enables policyholders to save money on their ‘own damage’ component depending on the total number of kilometres covered in a year. It is a kind of comprehensive car insurance plan that helps a policyholder cut down on his/her premium based on the car usage.
In other words, if you use a car less, you will pay a lower premium. You can customise the insurance policy based on the vehicle's usage in terms of the estimated distance to be covered by the car. At the same time, if you feel you are about to cross the total distance travelled, you can top it up to ensure the coverage.
“It is a cost-effective solution, particularly for infrequent vehicle users like urban dwellers reliant on public transportation or families with multiple cars. Various insurers adopt different PAYD policy models. Some plans enable setting an annual driving limit with corresponding premium slabs, while others allow users to ‘switch off’ their policy on non-driving days, earning bonus days for every switched-off day," says Nitin Kumar, Head, Motor Insurance, Policybazaar.com.
Read more on livemint.com
