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Home / Money / Personal Finance /  Things to know about pay-as-you-drive motor insurance
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A pay-as-you-drive motor cover is an assorted comprehensive insurance policy that charges the premiums based on the usage of your vehicle. The policy has two components: third-party cover and own-damage cover. 

The third-party cover is mandatory, and the premium is determined by the Insurance Regulatory and Development Authority of India (Irdai) as per the vehicle’s engine capacity. At the same time, the own-damage premium is determined by actual usage or distance driven. A telematics device (installed in your vehicle) monitors the utilization of the vehicle against the total number of kilometres covered as per the policy terms and conditions. 

Naval Goel, founder and CEO of PolicyX.com, said, “The pay-as-you-go motor insurance is more economical as you only pay for the part where the vehicle was used. 

The  tenure of pay-as-you-drive policy is one year, and the Irdai decides the third party premium to be charged under the policy. As a result, you pay the premium for the distance you drive. While the premium for the third party policy will not get affected by the distance, you will pay less for own-damage insurance cover if you drive less." 

To buy such a policy, you have to go through the standard KYC procedures and fill out the consent form at the time of buying or renewing your existing policy. The pay- as -you-drive policies are available on the insurers’ websites, online aggregators, and other offline distribution channels. 

Ashwini Dubey, head- motor renewals, Policybazaar.com, said, “Preference for pay-as-you-drive insurance policies was seen higher in newer cars (aged less than five years) during the month of April-May. Over 50% of customers live in metro cities, the rest divided across the country. Almost 50% of users who opted for this policy own a Maruti vehicle." 

Things to remember 

The insurer collects an upfront premium for the policy. Some aspects of this policy may differ significantly from a standard motor cover, so be aware of the exclusions and other provisions. First and foremost, if the vehicle exceeds the policy’s specified number of kilometres, the third-party coverage will continue to be lawful, but the insurer will deny the claim for your own damage cover. However, insurers typically provide the option to add more kilometres if usage is high. 

Dubey said, “The premium is generally calculated based on the distance driven rather than the time spent in the vehicle. As a result, the long hours spent stuck in traffic will be ignored in favour of the distance travelled. Depending on your needs, you can turn on or off your own damage coverage in certain policies. This, however, only applies to the component of own damage; third-party coverage continues throughout the policy period. If the policy is inactive or turned off, the insurer will not cover any accidental damage to the vehicle. If you revoke the policy or sell the vehicle, the standard benefits provided by the sandbox programme may be lost." 

Further, you must also remember that if you drive more for some reason within a year, your premium will increase and exceed beyond a regular motor cover. In such a case, the policy might not help you save on the premium cost.

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