Is Pay-Per-Kilometre Insurance the New Trend in Car Insurance?
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Travel Insurance
You recently bought your dream car, a sleek and efficient model perfect for city drives and weekend getaways. But here’s the catch – you don’t use it daily. Perhaps you prefer public transport for work or only drive occasionally. Yet, your car insurance premium remains as high as someone driving their car every single day. Sounds unfair, doesn’t it? What if there was a way to pay insurance based only on how much you drive? It is possible with pay-per-kilometre insurance.
What is Pay-per-Kilometre Insurance?
Pay-per-kilometre, also known as pay as you drive car insurance online, is a plan that requires you to pay only for the kilometres you expect to drive within a given timeframe, typically a year. This type of coverage differs significantly from standard car insurance, where a flat premium is charged regardless of whether you use your car for long trips or keep it parked in a garage for most of the month.
How Does Pay-per-Kilometre Insurance Work?
When you apply for pay-per-kilometre insurance (pay as you drive car insurance), you first need to understand your vehicle usage and, based on that, estimate how many kilometres you will drive in a year. Once you have clarity on this, choose the kilometre slab available with the insurer.
Let’s say the minimum slab your insurer offers is 2,500 kilometres, and you choose that. The insurer is responsible for covering any damage sustained by your vehicle due to a road mishap or other unfortunate events, but they are only liable to provide protection for up to 2,500 kilometres. If you expect your driving distance to increase before the year ends, you can opt for a top-up plan, which allows you to add additional kilometres to your existing plan.
You must remember four key points regarding this insurance:
- You must provide the odometer reading to your insurer when purchasing the policy. There is no need to install a telematic device in your car.
- The top-up plan with most insurers is typically available in multiples of 1,000 kilometres.
- The insurer provides buffer kilometres, usually 100-125 kilometres more than what is mentioned in the policy document.
- You can carry forward any unutilised kilometres to the next policy year, provided you have renewed the coverage on time.
Who Should Invest in Pay-Per-Kilometre Insurance?
Pay-per-kilometre coverage is ideal for you if your situation matches any of the following:
- If you only use your car for weekend outings, pay-per-kilometre car insurance online can save you money on unused coverage.
- If you have multiple cars and use one every 10-12 days, this type of insurance can be quite practical.
- If you are planning to sell your car in the coming months, spending a significant amount on comprehensive coverage might not be the best choice.
- If you only use your car for office commutes, and your workplace is just 2-3 kilometres from your home, this policy can be highly beneficial.
Benefits of Pay-Per-Kilometre Insurance
- Flexibility: With this car insurance online plan, you can choose the kilometre slab that best fits your requirements. You also have the option to top up the kilometres if your needs change.
- Transparency: The price of coverage is clearer than traditional car insurance, as the insurer bills you based on the odometer readings displayed at the time of renewal or purchase.
- Encourages Responsible Driving: Pay-per-kilometre insurance helps you avoid unnecessary journeys to ensure you do not exceed the kilometre range outlined in your policy document. This contributes to increased savings and a cleaner environment.
- Safe Driving Incentives: If you are a skilful driver and do not make any claims within the policy tenure, many insurers incentivise safe driving by offering discounts on your premium.
- Budgeting: With a clear link between usage and cost, this policy encourages budgeting. You become more conscious of how frequently you drive, helping you manage expenses effectively.
- Discounts from Third-Party Insurance Providers: Some third-party insurance providers offer discounts or lower base premiums for low-mileage drivers. This makes the policy even more attractive if you rarely use your car.
Conclusion
Pay-per-kilometre insurance is a smart and flexible solution for occasional drivers. It offers financial savings and promotes responsible driving by aligning costs with actual usage. Whether you drive rarely, own multiple cars, or are environmentally conscious, this innovative policy adapts to your lifestyle while reducing unnecessary expenses. As car insurance continues to evolve, pay-per-kilometre coverage could shape the future of affordable and tailored driving protection.
Disclaimer: No Business Standard Journalist was involved in creation of this content
Topics : Travel Insurance
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First Published: Jan 17 2025 | 3:30 PM IST
