You Can Reduce Car-Insurance Premium By Choosing Pay-As-You-Drive Insurance

Motor insurance cover forms an important part of the details connected with the normal usage of vehicles. This cost can be quite high as the coverage is comprehensive in nature and mandated by law.

The normal way of going about buying a car insurance policy is to use a standard policy where the premium is based on the value of the vehicle. Now with different parameters also coming into the picture, it is important to look at insurance cover under the Pay as you Drive head. This can lead to an element of saving for those who do not drive too much or use their vehicles infrequently.

The traditional way of buying car insurance has a fixed premium that is present on the vehicle based on its age and the value that has been calculated for this purpose, which is also known as the Insured Declared Value. A new car would, thus, have a higher premium which would go on slowly reducing as the car ages.

The other factor that is important as far as the car owner is concerned is the claim that has been made on the policy. If there are no claims, then there would also be a no claim benefit that can be used on the policy. This makes the process of buying the policy and its premium clear for the buyer as the trend is known over the life of the vehicle.

There is a new feature that has been introduced by insurance companies in recent years where the insurance premium for the vehicle is determined by an additional factor. This factor is the amount of distance that has been driven by the vehicle or, in other words, the extent of the usage of the vehicle. The logic behind such a policy is that if a vehicle is used for a relatively short distance or not very frequently, then the chances of accidents and claims on this are also likely to be lower.

This policy seeks to set the premium based on the distance that the car is travelling in a year. There will be a discount in the premium that will be available to the car owner based on the distance travelled in the car during the year and this will reduce the cost for them for lower usage.

This type of insurance cover is also known as usage-based insurance as the final premium depends on the extent of the usage of the asset. The way in which this normally works is that the policy has a certain premium that is charged. The car user has to submit the usage, or the distance travelled during the year at the end of the policy period and if this is done, then there would be a discount available on the premium.

In many cases, the insurance company offers an additional discount to renew the policy with them too, which becomes an extra benefit. Normally, there are various discount slabs where the percentage of the discount increases as the distance travelled goes down. 

Taking a pay-as-you-drive policy does not restrict several other benefits that are normally available with a car insurance policy, so the car owner does not suffer on this front. One of the common benefits is that of no claim bonus and this remains available even under such policies, so not making a claim will reduce the premium further.

In addition, other add-ons like zero depreciation and assistance and other features available with a normal policy will also be present here, so these can be used and the policy can be modified accordingly. There is not much additional disclosure and effort that has to be made for such polices as only the kilometres travelled by the car at the start and end of the year has to be provided. 

Arnav Pandya is the founder of Moneyeduschool.