If you drive your car less and want to save money on insurance, then you can adopt Pay-As-You-Drive (PAYD) scheme. But before taking a PAYD plan, it is important to make a correct estimate of your annual driving. If you drive a car daily then normal car insurance would be better, whereas for those who use it less, PAYD can prove to be an economical option.
Now you can save thousands of rupees on car insurance, know what is PAYD plan?
If your car is not used daily, you may no longer need to pay the full premium for normal car insurance every year. Now the option of Pay-As-You-Drive (PAYD) car insurance is also available in India. In this plan, the less your car is driven, the lower the insurance premium you may have to pay.
This new insurance plan is being considered especially beneficial for those people who drive a car only a few days a week, work from home, use public transport a lot or have more than one car in their house.
What is the plan?
Pay-As-You-Drive (PAYD) is a car insurance plan in which the insurance premium depends on how many kilometers you have driven your car in a year. When you buy or renew this policy, you have to select an annual kilometer limit in advance. For example, one can choose a slab of 5,000 km, 7,500 km or 10,000 km. These slabs may be different in different insurance companies. If you drive the car within the chosen limit, you have to pay a lower premium than normal car insurance.
How to know how much distance a car has traveled?
Insurance companies keep records of car usage in different ways. Some companies take information about kilometers on the basis of odometer reading. Some companies record the distance of the car through telematics device or mobile app.
Will third party insurance also be cheaper?
No. It is important to understand that the premium for third party insurance is decided by the government and regulatory body. Therefore there is no exemption in this. The savings in the PAYD scheme are only in the Own Damage Insurance part, i.e. on the insurance of damage to your own car.
For whom is this plan beneficial?
This scheme is considered especially good for those people who do not drive a car daily. Do work from home. Have retired. Keep more than one car in the house. Use the car only on weekends or travel short distances throughout the year. For such people, PAYD plan can lead to substantial savings every year.
Which people will not get much benefit?
If you use a car to go to office daily or travel long distances every month, then PAYD plan will not be very beneficial for you. If you exceed the prescribed kilometer limit, the insurance company may charge additional premium or shift you to the next slab. This rule may vary from company to company.
Keep these things in mind before buying a policy
Do not buy a PAYD plan just because of the low premium. First, make sure to check how the company measures the distance of the car. What rules will apply if the prescribed limit is crossed? Will there be a facility to increase the kilometer slab in between? How much additional fee will have to be paid? Before purchasing a policy, it is important to read all its terms and conditions carefully. If your car is driven less in a year, then PAYD insurance can be a good option for you to save money. But if you travel long distances daily, then normal car insurance would be better.
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