Pay as you drive insurance is a usage-based motor insurance. Here you need to pay your damage premium according to the distance covered by your car. 

In other words, the amount you pay for insurance is determined by how much you use your vehicle. This model is often referred to as "drive less, pay less" insurance

This policy includes two types of coverage:

  • Third-Party Cover: 

This covers damages caused to another person or their property with your vehicle.

  • Comprehensive Cover: 

This provides more protection. It covers both your damages and the damages you cause to someone else or their property.

Here are the key features of a Pay as-You Drive insurance policy:

  1. Usage-Based Premiums: The premium is calculated based on the number of kilometers driven, resulting in cost savings for those who drive less.
  2. One-Day Car Insurance: Offers flexibility and makes it ideal for infrequent drivers who need coverage only for the days when they go on a drive.
  3. Same-Day Car Insurance: Offers the convenience of same-day car insurance based on your driving plans.
  4. Cost Efficient: PAYD comes with lower premiums for low-mileage drivers, promoting savings for those who do not drive extensively.
  5. Flexible Plans: Offers various mileage brackets or customizable plans to suit different driving habits and needs.
  6. Transparent: Provides clear insights into how premiums are calculated and allows policyholders to monitor their mileage for a better cost.
  7. Free installation of telematics device: The insurance provider installs a telematics device free of cost on the car being insured. This monitors the car’s condition and driving habits of the car owner.

Who should Buy Pay as you drive insurance?

  • Work from Home WFH/Hybrid Work = A Parked Car:

 If your car is primarily used only for weekend outings and you are spending most days working from home, it means you are driving much less. In this situation, Pay-as-you-go drive insurance would be the best option.

  • Retired Explorers:

 Retirees who have swapped their daily commutes for leisurely drives can now enjoy rewards for their reduced mileage with one-day car insurance.

  • Ideal for Specific Users:

Perfect for occasional drivers, people with multiple vehicles, or those who rely mainly on public transportation, providing coverage only when needed.

  • If you have multiple vehicles:

 If you are taking out the car primarily for special occasions, opt to pay as-you-go for drive insurance.

  • Students: 

College or university students who only use their car occasionally, such as for weekend trips or holidays, can take advantage of lower premiums with one-day car insurance.

What happens if the declared car usage limit is exhausted in Pay as you drive insurance?

Suppose your declared car usage limit of 15,000 km is exhausted, then also you do not have to pay extra.  Do you know that you can still benefit from your existing comprehensive car insurance policy? However, during claim settlement, the insurer may require you to pay a copayment amount. Additionally, if your vehicle insurance policy expires and you have exceeded the declared kilometers, you will not be eligible for a premium discount on your renewal policy. To continue availing of this plan, you must upload photos of your car before your policy expires.

How Does Pay as You Drive Insurance Work?

  • Declare Car Usage: The first thing you must do is specify how you will use your vehicle over the one-year policy period depending on the total amount of kilometres it will travel.
  • Odometer Reading: To receive the benefits of this plan, you must upload a video stating your car's odometer reading before the policy expires.
  • Premium: Once you give your approval for this plan, you are entitled to earn a 10% reduction on the cost of your damage insurance.
  • Claim Process: The claim will be resolved as usual if it falls within the defined slab. When a claim exceeds this cap, the policyholder makes a request of co-payment of a particular amount.


People who own multiple cars but do not utilize them equally might find insuring all of them expensive. Nevertheless, it is compulsory to insure every vehicle, even if it has rarely been used, under the Motor Vehicles Act, 1988. With the IRDA's introduction of pay-as-you-drive insurance, insurers can now tailor insurance solutions with a customer-centric approach.

FAQs on Pay as you drive Insurance 

1. What is PAYD?

The premium of Pay as You Drive insurance is calculated based on the individual's customized coverage. As a result, choosing a Pay as You Drive add-on in addition to regular car insurance will benefit customers with limited vehicle utilization.

2. How many times can one claim car insurance in a year?

There is no specific number of car insurance claims as of now, but also advise you to read the terms and conditions before purchasing a PAYD policy.

3.  Can I get one-day car insurance also?

Yes, you can choose coverage for a single day, a week, or any other time that suits you. You have to pay a premium based on the length of your coverage and the level of coverage you choose.

4. What is the difference between pay as you drive and own damage?

PAYD is determined based on car usage; this plan is very similar to a comprehensive insurance policy that includes two main features: third-party premium and own damage (OD) cover. PAYD Cover = Third-party Liabilities Own Damage Premium + Add-Ons (if any).

5. Can I switch back from PAYD to a traditional insurance policy?

Yes, most insurers allow you to switch back to a traditional insurance policy if you find that PAYD insurance is not suitable for your needs. Contact your insurer to discuss your options.

6. What are the benefits of PAYD insurance?

Benefits of PAYD insurance include:

  • Lower premiums for low-mileage drivers.
  • Potential savings for safe drivers.
  • Incentives to drive less and safer.
  • Better alignment of insurance costs with actual risk and usage.