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Everything you should know about “Pay as You Drive” Car Insurance

“Pay as you drive” is a new concept which was introduced in India recently and the success of it is yet to be ascertained. This product was introduced in the market as per the Sandbox regulations of IRDA for a period of 1 year, the continuity of the product will be reviewed after the trial period by IRDA.


It is easy to buy a Car but difficult to maintain it is the word that can be heard from almost everyone. This is due to the maintenance costs associated with the car such as insurance, service costs etc. Out of these insurance cost of the vehicle could be quite high during the first 5 years age of the car due to add-ons etc., As per the Motor Vehicle Act, 1988 it is compulsory for your car to have a valid third party insurance, while the own damage insurance can be taken depending upon the affordability and need of the insured.

What is “Pay as You Drive” Car insurance?

“Pay as you drive” car insurance policy is a part of the comprehensive car insurance policy wherein the own damage cover can be chosen on the basis of usage of car. You need to declare and select the number of kilometres you expect to drive your car and pay the premium for the same which would be calculated using a pre determined formula.

How does “Pay as You Drive” Car insurance work?

Under the “Pay as you drive” car insurance, you have the option to choose the number of kilometres you would drive in a year. These slabs would be 2500km, 5000km, 7500km and the premium for each slab would be different depending on the make, model, age and other factors of the car.

  • Select the slab of your choice, pay premium for the same. Opt for add-ons if required.
  • Send a photo of your odometer reading to the insurance company for record purpose.
  • Start driving your car as usual while keeping a note of the total kilometres driven. Ensure that the selected limit of kilometres is not crossed.
  • If the distance driven exceeds the slab, then inform the insurance company of the same.
  • Insurance company will ask you if you want to convert to regular comprehensive policy or upgrade your slab.
  • If you want to upgrade the slab, pay the proportionate premium to the insurance company and drive your car as usual.
  • Remember, it is of utmost importance to inform the insurance company if you exhaust your limit, failing which could result in declining the Own damage claims.

Concept of Telematics:

Some insurance companies provide you with a “telematics” device to keep a track of the driving pattern of the car. The speed at which the car is driven, number of times brakes is applied, number of kilometres driven would be captured with the help of this device and is shared with the insurance company for better calculation of premium.

The concept of telematics is introduced to award the drivers on the basis of their driving pattern. Good drivers are awarded with reduced premium while the arrogant drivers are penalised with loading of premium.

Who should opt for this?

  • If you have more than one car and use one car regularly and the other cars rarely, then it is advisable to take “Pay as You Drive” car insurance for those cars which are used rarely.
  • In case you use your car only for limited kilometres on special occasions then you can opt for “Pay as You Drive” insurance.

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