Archive · 29 Aug 2026
Pay As You Drive Insurance Cuts Costs for Low-Mileage Drivers
Pay As You Drive insurance is designed for people who do not drive their cars very much.
Instead of charging everyone the same amount, it links part of the price to how far the car travels.
Drivers choose a kilometre limit and tell the insurer their odometer reading.
Lower kilometre limits can mean a lower own-damage premium.
A driver can usually add more kilometres if unexpected trips are needed.
Unused distance may be carried into the next policy under some plans.
However, drivers must watch their distance because exhausting the limit can put coverage at risk.
People who drive long distances regularly may find ordinary insurance more suitable.
PAYD can reduce a car’s own-damage premium by up to 30% for drivers traveling less than 10,000 km annually.
Policyholders declare their odometer reading, select a kilometre limit, and retain their existing own-damage coverage.
Available kilometre slabs begin at 2,500 km, with options to add top-up kilometres if driving increases.
Running out of the selected kilometre limit can affect coverage and may lead to higher costs or penalties.
PAYD may suit infrequent drivers, public-transport users, retirees, hybrid workers, and owners of multiple cars.
- Who
- Car owners, especially those with low or predictable annual mileage, can use PAYD; insurers offer the add-on under their own terms.
- What
- Pay As You Drive is a usage-based add-on that links part of a car’s own-damage premium to distance driven.
- Where
- The option is available in India, depending on the insurer and location.
- Why
- It is intended to align insurance costs with actual vehicle use and potentially reduce premiums for low-mileage drivers.
PAYD Advantages
PAYD Risks and Limitations
Lower premiums
PAYD Advantages
Drivers who use their cars less may pay less than average, with indicative own-damage premiums ranging from 25%-40% of regular premiums for up to 2,500 km.
PAYD Risks and Limitations
If mileage exceeds the selected limit, extra costs or penalties may reduce or eliminate the initial savings.
Flexible driving limits
PAYD Advantages
Policyholders can choose a kilometre slab, add top-up kilometres, and in some plans carry unused distance into the next policy.
PAYD Risks and Limitations
Drivers must monitor their odometer closely; exhausting the kilometre limit can affect the protection offered by the insurance.
Suitability
PAYD Advantages
Infrequent drivers, public-transport users, hybrid workers, retirees, and owners of multiple cars may benefit from PAYD.
PAYD Risks and Limitations
Frequent long-distance commuters and regular highway travelers may find traditional insurance more suitable.
- Potential saving
- Up to 30% on the own-damage premium for eligible drivers, according to the article.
- Suggested usage
- The option may suit drivers traveling less than 10,000 km annually.
- Starting kilometre slab
- 2,500 km, with slabs customisable in multiples of 1,000 km.
- Grace distance
- Insurers provide a grace distance of up to 125 km per year.
- Coverage
- Policyholders receive coverage under their own-damage car insurance policy.
- Top-up option
- Additional kilometres may be added during the policy period if driving needs change.
- Availability
- PAYD is relatively new in India and is not offered by several insurers.