Drive Less? How Pay-As-You-Drive Insurance Can Lower Your Car Premium

If your car spends most of its time parked rather than on the road, why pay the same insurance premium as someone who drives it every day? Pay as You Drive (PAYD) is meant for low-mileage drivers, with the Own Damage premium linked to how much you actually drive. It can be particularly useful if you work from home, have more than one car or usually rely on public transport.

According to insurers, PAYD is a motor insurance add-on that charges the premium for your Own Damage policy based on how much you drive. It offers significantly lower premiums than traditional comprehensive policies. Since you are driving less, you reduce your risk of accidents, which translates into lower insurance costs.

Says Aditya Kumar, motor underwriting head, Digit Insurance: “PAYD is beneficial for people who use their vehicles less. If you are someone having multiple vehicles, work remotely or have a hybrid structure that doesn’t require daily commute or if you prefer to use public transportation and leave your vehicle at home, PAYD is a beneficial add-on to consider. People living in smaller towns who only need to drive within their town, or city limits, can also consider opting for PAYD.

Discounts offered or the structure of PAYD offering may vary from insurer to insurer. For instance, Digit Insurance offers up to 90 per cent discount on your own damage premium based on the kilometers you drive annually and other factors. Unlike traditional own-damage motor policies, PAYD charges you based on your actual mileage.

During policy purchase, based on your estimated driving requirement, you can opt for the kilometer band you require and receive a discount on the Own Damage premium. If you cross your declared limit, you can pay an additional premium for a top-up without having to worry about coverage. To opt for the correct band, you should estimate the average distance you have been driving for the last three years. 

Some insurers also offer an alternative method in which you can opt for a PAYD add-on. The PAYD discount is determined using the vehicle's historical odometer readings, and customers with an average annual usage of less than 12,000 km can avail the benefit.

“Customers do not need to choose a specific kilometre slab. Even if you end up driving more than expected during the policy period, your coverage continues uninterrupted. There is no need to purchase additional top-ups, recharge your kilometers, or contact the insurer midway through the policy term,” informs Kumar.

Motor insurance premium is based on the age and make of your vehicle, the IDV you have declared and the add-ons you have selected. A comprehensive policy would cost more than a basic Third-Party Policy. PAYD is a feature that allows you to save on your car insurance premiums without compromising on the protection.