How does pay as you drive insurance work ?

These days, many drivers have changed the way they purchase car insurance, particularly when they're not driving that frequently. This is when pay as you drive insurance comes into the picture. It's a pay-per-use policy that is more flexible in nature as it adjusts your premium in accordance with the amount you drive.

But how pay as you drive insurance work, and could it be the right fit for your lifestyle? In this blog, we’ll walk you through the ins and outs of it and why it’s becoming a popular choice for low-mileage drivers.

What is pay as you drive insurance?

Pay as you drive insurance is a form of car insurance that calculates your premium on how you drive and how many miles you do, instead of a fixed yearly payment. It’s also referred to as usage-based insurance. It’s a more flexible and equitable form of insurance that only asks for your payment when you use your car. It is perfect for those who drive little.

Instead of paying the same amount whether you drive 500 or 5,000 miles a month, this insurance policy adjusts your premium based on your real usage. This makes it ideal for people who don’t drive regularly.

Pay as you drive insurance policy is especially ideal for:

●        People who work from home

●        Retirees

●        Students

●        Urban dwellers who mainly use public transport

●        Anyone who owns a second car they don’t drive regularly

How does the pay as you drive insurance work?

Pay as you drive insurance tracks and measures your car use using technology unlike more conventional policies. The following describes how it functions and how to turn on it:

Activation process

·       When you buy a pay as you drive policy, here’s how it typically gets activated

·       Select your slab of distance: Depending on your driving patterns, you choose a predetermined usage cap, such as 2,500, 5,000, or 7,500 km annually.

·       Download the insurer's app: Most insurance companies offering pay as you drive will have a dedicated mobile app that you need to download. This app helps track your kilometres and may also assess driving behaviour.

·       Install a telematics device (if necessary): A tiny device may need to be installed in the OBD port of your vehicle to be covered by some insurance companies. This gadget records information about your speed, mileage, braking habits, and other things.

Start driving: Your insurer starts tracking you're driving in real time as soon as it is activated through the app or device. Cost-effective coverage:

·       By allowing you to match your coverage to how much you actually drive, this policy can help you save money. For example, if your car is used occasionally, opting for a lower kilometre limit can keep your premiums economical.

Billing:

Your premium is determined by usage. Driving below the agreed-upon limit is the key to saving money. However, going over your mileage cap may result in additional fees or even fines.

Also, be cautious when choosing an insurer, some unreliable sources might trick users into signing up for fake motor insurance schemes that look genuine but offer no real coverage.

Benefits of pay as you drive insurance

Let’s be honest, traditional car insurance can feel a bit like a one-size-fits-all. Sure, it technically covers everyone, but it doesn’t always fit right. Pay as you drive insurance policy, on the other hand comes with several perks:

·      Fairer pricing

This is the biggest win. If you're barely using your car, why pay the same as someone commuting 50 miles a day? Pay as you drive rewards low-mileage drivers.

·      Encourages safer driving

Pay as you drive policies track your driving behaviour. If you avoid speeding, brake gently, and drive during safer hours, you might qualify for additional discounts.

·      Eco-friendly

Driving less not only saves money but also reduces your carbon footprint. Pay as you drive policies can make you more mindful of unnecessary trips.

·      Budget friendly

For people who only use their car occasionally, pay as you drive insurance can lead to serious savings. It’s ideal if you're trying to stick to a tighter monthly budget.

Pay as you drive vs traditional car insurance policy

Let’s put them side by side so you can see the difference:

Final thoughts

If you use your car less often, you can save on your premium charges by opting for a pay as you drive car insurance policy. If you have more than one car in your fleet, you may also choose to buy this cover for the car that you use the least. Keep in mind that the policy premium shall also vary according to different parameters specific to the type of policy you opt for, the car you own, the car's age, and riders you add. Therefore, invest a little time in knowing all conditions and terms and decide accordingly.

And remember, while it might not be for everyone, it’s worth a look if your annual mileage is on the lower side. Just make sure you’re signing up through a trusted provider to avoid falling into the trap of fake motor insurance.

At the end of the day, pay as you drive insurance puts you in the driver’s seat, not just on the road, but with your finances too.