Did you know about usage based insurance offered by some insurance companies? If not, read on to find out more about all the benefits of Usage based insurance.
So, you did not drive your car as much last year. Maybe, you were away on a business trip, or you have a second vehicle that you used more, or you were out of the country, or any other reason. Your car spent more time in the parking lot than on the road. However, the only benefit your insurance company gave you on your insurance premium was the no-claim bonus.
Seems unfair, doesn’t it? After all, if your car was not out on the road, the risk of it meeting with an accident or being damaged is lower. Then why pay the full amount for the insurance premium? Wait, have you ever looked at your premium expenses from this perspective? If not, you should.
It’s pretty logical, if the risk is lower, then the premium should be lower as well. If you get awarded a bonus for not claiming insurance, there should be some benefit for not putting your car at a risk.
Now, if the above argument made sense, fret not. There is good news. The Insurance Regulatory and Development Authority of India (IRDAI) has now allowed insurance companies to introduce usage-based insurance (UBI) covers. You can visit the official website of IRDAI for further details.
What is Usage Based Insurance?
Usage-Based Insurance (UBI) is a new way of calculating insurance premiums. There are two major aspects to it – Pay As You Drive (PAYD) and Pay How You Drive (PHYD). While this concept is almost a decade old in Western countries, it has recently made its way to India. UBI can be availed in three variations – PAYD, PHYD or Pay As You Go (PAYG). *
Pay As You Drive (PAYD)
As the name suggests, if one opts for the PAYD premium, they will need to pay the insurance premium calculated based on the number of kilometres they drive or the duration the vehicle was driven for. The insurer will use data from the telematics in the vehicle to track the kilometres and duration. As mentioned earlier, the logic is simple the lesser the car is on the road, the lesser the risk of it being damaged. Which is why this reduces the overall premium of the insurance. Besides, you can still enjoy the benefits of the traditional premium plan. People who own multiple vehicles, or are out of the city or country a lot can opt for this kind of premium plan. *
Pay How You Drive (PHYD)
This one is a boon for all the “good” drivers out there. A little pat on the back for driving well and safely on the roads. For PHYD too, insurers will use telematics and GPS to determine your usage pattern, driving habits, engine health, speed of the vehicle, and some other data points. Each driver is awarded points based on the above parameters and those points will earn you a lower insurance premium. The better the score, the lower the premium you’d need to pay at the time of car insurance renewal. Better and safer driving leads to lower risk. As of now, there are no penalties for bad or rash driving. If you are someone who follows all the rules, does not violate speed limits, and takes good care of your vehicle, this premium plan is for you. *
Pay As You Go (PAYG)
Simply put, PAYG is a combination of both PAYD and PHYG. With this premium plan option, you can get a double benefit. The best of both worlds. One who seldom used their vehicle and follows all the rules should go for the PAYG plan.
Overall, how the claim is calculated will vary from policy to policy and based on your insurer as well. *
* Standard T&C Apply
Benefits of Usage Based Insurance
With UBI, you will be able to get the cover and peace of mind of your traditional insurance cover, but at a lower premium. Some of UBI’s benefits are:
- Lower premium costs
- Hassle-free claims management
- Easier recovery if the vehicle is stolen. Thanks to onboard telematics
- Promotes better driving habits
So, the next time your car insurance is up for renewal, consider the benefits of Usage-Based Insurance and explore the options you have before you purchase your next policy. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.