Here’s how you can save thousands of rupees on car insurance—find out what a PAYD plan is..

If you drive your car infrequently and want to save money on insurance, you can opt for the Pay-As-You-Drive (PAYD) scheme. However, before purchasing a PAYD plan, it is essential to accurately estimate your annual driving distance. Standard car insurance is better for daily drivers, whereas PAYD can prove to be a cost-effective option for those who use their cars less often.

Save thousands on car insurance—find out what a PAYD plan is.
If your car isn't used daily, you may no longer need to pay the full premium for standard car insurance every year. The Pay-As-You-Drive (PAYD) car insurance option is now available in India. With this plan, the less you drive your car, the lower your insurance premium could be.

This new insurance plan is considered particularly beneficial for those who drive only a few days a week, work from home, rely heavily on public transport, or own more than one car.

What is the plan?
Pay-As-You-Drive (PAYD) is a car insurance plan where the premium depends on the number of kilometers you drive your car over the course of a year. When purchasing or renewing the policy, you must select an annual kilometer limit in advance. For instance, one could choose a slab of 5,000 km, 7,500 km, or 10,000 km; these slabs may vary across different insurance companies. If you drive within your chosen limit, you pay a lower premium compared to standard car insurance.

How is the distance driven tracked?
Insurance companies track car usage in various ways. Some companies determine the distance based on odometer readings, while others record the distance traveled using telematics devices or mobile apps.

Will third-party insurance also be cheaper?
No. It is important to understand that the premium for third-party insurance is determined by the government and the regulatory body; therefore, no discounts are available on this component. Savings in a PAYD (Pay-As-You-Drive) plan apply only to the 'Own Damage' insurance component—that is, the coverage for damage to your own car.

Who benefits from this plan?
This plan is considered particularly beneficial for those who do not drive their car daily, work from home, are retired, own more than one car, use their car only on weekends, or cover short distances annually. Such individuals can achieve significant annual savings with a PAYD plan.

Who might not benefit much?
If you use your car for a daily office commute or cover long distances every month, a PAYD plan may not be very advantageous for you. If you exceed the stipulated kilometer limit, the insurance company might charge an additional premium or move you to the next slab; these rules can vary from company to company.

Things to consider before buying the policy
Do not purchase a PAYD plan based solely on a low premium. First, verify how the company measures the distance driven and what rules apply if the limit is exceeded. Check if there is a facility to upgrade the kilometer slab mid-term and what the additional charges would be. It is essential to carefully read all the terms and conditions before purchasing the policy. If your car usage is low throughout the year, PAYD insurance can be a great way to save money; however, if you cover long distances daily, standard car insurance would be a better choice.

Disclaimer: This content has been sourced and edited from News18 Hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.